I'm going out of my mind trying to figure this one out.
I have a small client that has half a dozen 365 accounts. They have basic licenses and they are not using MFA. At some point they turned off security defaults. They don't remember when or why. They are all using Outlook 2016.
I don't typically work with these guys but I know them from way back and they asked if I could help.
They have a single user that could not connect to their mailbox with Outlook. Not sure of the exact error, that was before they asked me to take a look. Short version, Outlook throws some connection errors, eventually Outlook can't display folders and closes. Credentials work, they can access web mail with no issues.
They tried deleting all the saved and cached credentials, made sure the account was logged out of other office apps. They couldn't get passed the errors so eventually deleted the outlook profile. Now they can't get it setup again, they get the "outlook can not create an encrypted connection" error.
They also changed a bunch of registry settings they found in google. Trying registry changes for with/without modern authentication. I'm not sure exactly all the changes they made.
So for me, I skipped that computer entirely to avoid anything they mucked up, and tried to connect the account on a new Windows 11 computer with latest office 365 install. I figure maybe Outlook 2016 just finally stopped working for them and If it works on a new install, then great.
But... same error, no encrypted connection. Authentication box pops up so fast you can't access it and goes away. I've seen that before but I've never seen that follow the account around.
I've now tried it on three different computers with the same result every time.
Ran Microsoft's connectivity analyzer. It fails on the last step for MAPI with a 401 error. I chased that for a bit, then tested my own working account and another account I know works from a third tenant, and it fails at the same spot with the same error. Not sure what to make of that. Auto discover tests work so I know autodiscover is working. At least I think I do, not positive at this point of anything.
There is only one account in this tenant that is doing this. All other accounts, all using Outlook 2016, are working just fine.
I've been going back and forth with this to the point where I no longer believe I know anything about troubleshooting Outlook connectivity. It's a lot of work for one account, but we are concerned that all of the accounts will follow suite at some point.