Not used it myself but from this
http://my.safaribooksonline.com/9780672329630/ch22
I guess it does.

No, Windows Home Server does not have Active Directory. Instead, it has a synchronization utility which runs automatically and synchronizes passwords between computers, so a change of one user account on one station will also reflect all other stations on the Home Server network.

If you want the benefits of Active Directory and Group Policy you should look at an SBS server instead. WHS does not include Active Directory for two main reasons - it is built for HOME use, and AD would overcomplicate the feature set, and the server software is a lot cheaper, meaning it doesn't have a lot of the features.

http://arstechnica.com/news.ars/post/20070108-8573.html might be a useful read.

-tigermatt

Here is how to get active directory on Windows home  server
I want to know if it has group policy.


How to get to active directory in Home server:
What you will need
      " Windows Home Server Console
      " Remote Desktop Connection
      " Windows Home Server Installation Disk
Discussion
Since Active Directory wasn't really made to work with Windows Home Server people thought installing it wasn't possible. Well, here is how I've managed to get it working on mine.
Installing Active Directory
Starting off, open up a remote desktop session to your server. To open the installation wizard, you need to run dcpromo. To do that, go to Run (Win + R, Start => Run) and have enter in (followed by the enter key): dcpromo
You should be greeted with the Active Directory Installation Wizard, allowing you to install ActiveDirectory and DNS. Once the wizard pops-up, click Next to continue, and Next again to go past the OS Compatibility page. You will be asked for the Domain Controller type, you want to choose 'Domain Controller for a new domain', and click next. You could join an existing domain, but most home users wouldn't have an domain already setup to join. Make sure 'Domain in a new forest' is selected and choose next.
Now, you have to come up with a DNS name. In my case, I used my last name followed by '.local'. If you do own a domain name, do not use it here. Once you've come up with a DNS name, click Next. Now you will be brought to a page asking you for a NETBIOS name, this is basically your domain name. You will notice a name has been suggested based upon what you entered for the DNS name, keep it and click Next. Alright, now it will ask where you want to store the database and log files. You should store them on the D: drive, I recommend D:\NTDS for both. After changing the paths accordingly, click Next. Now it asks where to store the SYSVOL folder, you should also store this on the D: drive. D:\SYSVOL will work just fine. Change the path, and click next. Now you should see 'Diagnostic Failed', don't worry about it. That is because DNS hasn't been installed and setup. Click next twice. Now enter in a password that will be used if the Server is started in Directory Services Restore Mode. This password can be the same as the WHS password. After typing in the password and confirming it, click Next.
Now you are at the summary screen, make sure the NetBIOS name and paths are correct. When ready to have Active Directory actually be installed, click Next. This part may from ten to fifteen minutes to complete. Eventually, you will be prompted with the Windows Home Server Install disk, pop it in and click OK. In a moment, you will be asked again for the Server 2003 disk, just click Browse, Open, and then OK.
Now it should ask you to change to a static IP if you were using a dynamic IP on your network. I would recommend you do so because you will have to change the clients primary DNS later on. Once you've changed the IP to static, click OK and proceed onward. Once the DNS configuration is complete you will see 'Completing the Active Directory Installation Wizard'. Click Finish, and then Restart Now. Congratulations, you've installed and configured Active Directory!

Joining Workstations to Your Domain
Now we have to change the primary DNS for your workstation's network card and join it to the domain. Joining a domain is fairly straight-forward. I'll get to that in a minute, first you need to change your workstations DNS settings.
Windows XP
DNS
For Windows XP, you need to open up Control Panel. Once opened, choose Network and Internet Connections and then Network Connections. Right click the network adapter(s) you use to connect to your network and choose Properties.
Select the Internet Protocol item listed, and click Properties.
Once there, select 'Use the following DNS server addresses'. For the preferred DNS enter in your server's IP addess. For the alternate DNS, put your router's address (in case your server is turned off). Click OK, and OK again. Close Network Connections and continute to the Join section.
Join
To join the domain open up the System Properties dialog (Start => Right click My Computer => Properties). Click the Computer Name tab. Now to join the domain, we have to switch from using a workgroup. To do so, click the Network ID button. You should see the Network Identification Wizard. This will guide you through joining. Click Next, and choose the first option. Click Next again, and again.
Now, enter in your Windows Home Server personal account name, followed by the password. The Domain is the same as the NetBIOS name that you set on the server. Click Next, and you will see a messagebox saying an account for the computer was not found. Click OK, and continue. Leave the Computer name as it was, making sure the Computer domain is what you put before. Click Next. Now, you get asked for the domain user name and password. For the user name, put Administrator. The password is your Windows Home Server password. Enter in the domain (NetBIOS name).
You should see the User Account page, just click Next. If you want the user to act as a local Administrator, choose Other and then Administrators. Finally, click Finish, then OK and Yes.
Windows Vista
DNS
To start, click the network icon in your system tray. Next click Network and Sharing Center. Once that pops up, click Manage Network Connections. Right click the network adapter(s) you use to connect to your network and choose Properties.
Select the Internet Protocol item listed, and click Properties.
Once there, select 'Use the following DNS server addresses'. For the preferred DNS enter in your server's IP addess. For the alternate DNS, put your router's address (in case your server is turned off). Click OK, and OK again. Close Network Connections and continute to the Join section.

Join
To join the domain open up the System Properties dialog (Start => Right click Computer => Properties). Click change settings under Computer Name, domain, and workgroup settings. Click the Network ID button. You should see the Network Identification Wizard. This will guide you through joining. Click Next, and choose the first option. Click Next again, and again.
Now, enter in your Windows Home Server personal account name, followed by the password. The Domain is the same as the NetBIOS name that you set on the server. Click Next, and you will see a messagebox saying an account for the computer was not found. Click OK, and continue. Leave the Computer name as it was, making sure the Computer domain is what you put before. Click Next. Now, you get asked for the domain user name and password. For the user name, put Administrator. The password is your Windows Home Server password. Enter in the domain (NetBIOS name).
You should see the User Account page, just click Next. If you want the user to act as a local Administrator, choose Administrators. Finally, click Finish, then OK and Yes.
Conclusion
That's really all you have to do to install Active Directory and join the domain. Later, I will be adding the ASP.NET fix (installing Active Directory demotes Network Service), how to login to local accounts in Vista after joining a domain, and more!