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Dear Sir,
I have set-up Terminal Server Service  on Window-2000 Server . When I try to telnet on this machine from some other Window machine , I am getting a message :

"NTLM Authentication failed due to insufficient credentials . Please login with clear username and password
 Server allows NTLM authentication only
 Server has closed connection"

Due to this problem I am not able to Telnet . Kindly guide me .

B Mittal
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1 Solution
You are mixing terms: Terminal Server is not a Telnet server.

Terminal Server allows users to connect to _graphical_ console via RDP protocol (using rdesktop or like client)
Telnet service allows users to connect via telnet protocol, text based (using telnet command line)

While Telnet service is embedded to standard Windows, it should be started manually and it supports only NTLM authorization (that means that you can connect to in only from telnet client with NTLM support). You may either find telnet client with NTLM authorization or to disable NTLM in Microsoft Telnet service. Standart telnet.exe doesn't support NTLM.
For disabling NTLM in Win 2000 telnet server, look here: http://www.chicagotech.net/telnet.htm
By default, the Win 2000 Telnet service requires NTLM authentication. However, if Win 2000 is configured to use Kerberos as its default authentication method, then Telnet users are not able to obtain access to domain/AD resources including network validation. To configure the Win 2000 Telnet Service to not require NTLM, run  Telnet Server Administration, select  option 3,  Display / change registry settings and then select option 7,  NTLM. Change the default setting from 2 to 0 to disable the NTLM requirement.

P.S. Telnet Administrator is located in "Programs/Administrative Tools"
Also you should restart telnet service after changing option 7 (i.e. from command line):
net stop telnet
net start telnet


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