Sharing domain email addresses between Exchange server 2007 and ISP's POP3 server

I have a client who has been using Exchange server 2003 with 3rd party POP3 connector to receive emails.  Onternal users have internal emails hosted by Exchange whilst other colleagues who work remotely do not have themselves set up as users and use an ISP to collect emails.  All internal users could send emails to the external POP3 users even though they had the same domain name (ie all

Now we have upgraded him to Exchange 2007, the external recipients emails are being rejected by Exchange 2007 because it assumes that, as they have emails ending in, they are internal recipients.  Therefore the emails are not sent from the network and these then bounce as the Exchange server has no record of those email addresses as they are not internal users

I have read that it is possible for more than one mail server to host emails for the same domain, but cannot make this work. I am struggling to resolve this and would appreciate any help.

Does anyone have an ideas?
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You will want to look at this article to help you:

Right now it sounds like the domain(s) in Exchange 2007 are set to be Authorative, and thus if the address does not exist in the organization, then Exchange will reject it.

Let us know if you have any further questions.

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you need to configure the accepted domain as an external relay
then you need to create a send connector with the smtp address space of and configure it to send to smart host of the ISP
The advantage of having a POP3 connector is that you can fetch e-mail for users for any domain, as long as you link up the inbound e-mails with the accounts they're supposed to go to.  With a standard Exchange server, this is unfortunately not possible.

When you add "Accepted Domains" to the Exchange environment, there are 3 options available to you.

Authoritative Domain - This is the default option, and it means that all people inside that e-mail domain are expected to be on the Exchange Server.

Internal Relay Domain - Not applicable

External Relay Domain - Naturally, the mails will be forwarded to people outside of the mail server.

What you could try to do is specify the domain as an "External Relay Domain".  Perhaps Exchange 2007 is smart enough that it will deliver mail locally for mailboxes it can find - and relay externally for mailboxes it can't find.  I don't know if this will work or not but worth a try.

The question then is - how do you deal with inbound e-mail?  Do you still use POP3 to fetch mail or does mail come in via SMTP ?  What about your MX records?

Splitting the same e-mail domain across completely different mail servers is not recommended, due to the complications it causes - like this one.

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amlydiateAuthor Commented:
Thanks for your replies.  I tried chaning the settings to the esxternal relay option and got the error below. What is the best way of resolving this?
Microsoft Exchange Error
The following error(s) occurred while saving changes:

Cannot remove the domain "" because it is referenced by the proxy address template ' .

amlydiateAuthor Commented:
Checking through some other information, I found that this can be resolved by removing the email address policy on the next tab along from the accepted domains.  Having done this it then works.  Still waiting for feedback on the resolution to the original problem.

you need to add this domain as an accepted domain with external relay and create a send connector for this domain to the ISP
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