How to Fix Azure AD Error "AADSTS700054": Enabling ID Token Response for Applications

When integrating applications with Microsoft Azure, administrators may encounter the error “AADSTS700054: response_type ‘id_token’ is not enabled for the application”. This issue occurs when an application attempts to use OAuth 2.0 implicit flow for authentication but lacks the necessary configuration to return ID tokens. The error disrupts workflows, particularly in scenarios involving Dynamics 365 Dataverse or other Azure AD-integrated services.

Key Takeaways

The error indicates disabled implicit flow or ID token permissions in Azure AD app registration.
Resolution requires modifying the app manifest (oauth2AllowImplicitFlow) and enabling ID tokens in authentication settings.
Administrative privileges are necessary to implement these changes.

Root Cause Analysis

The error AADSTS700054 arises when an application registered in Azure Active Directory (Azure AD) attempts to request an ID token during OAuth 2.0 implicit grant flow, but the app’s configuration prohibits this response type. This is common in applications leveraging Microsoft Dataverse or Dynamics 365 integrations.

Azure AD’s implicit flow allows clients (e.g., single-page apps) to receive tokens directly without backend credential exchange. However, this flow must be explicitly enabled due to security considerations.

Step-by-Step Resolution

1. Enable Implicit Flow in the App Manifest

Navigate to Azure Portal > Azure Active Directory > App Registrations.
Select the problematic application and click Manifest.
Locate the oauth2AllowImplicitFlow parameter and set its value to true:
```
"oauth2AllowImplicitFlow": true
```
Save the manifest.

2. Enable ID Token Issuance

Under the same app registration, go to Authentication.
In Advanced Settings, select Implicit grant and hybrid flows.
Check the box for ID tokens.
Save the configuration.

After applying these changes, retest the authentication workflow. The error should resolve if the application’s logic aligns with implicit flow requirements.

Security Implications

Understanding this configuration is critical for security teams:

Red Teams: Simulate authentication flaws in Azure-integrated apps.
Blue Teams: Audit app registrations for unnecessary implicit flow to reduce attack surfaces.
System Administrators: Proactively configure apps during deployment to avoid operational disruptions.

Best Practices for Remediation

Least Privilege: Restrict implicit flow to apps requiring it (e.g., SPAs). Prefer auth code flow with PKCE for web apps.
Monitoring: Log and alert on AADSTS700054 errors to detect misconfigurations.
Documentation: Maintain records of app registration settings for audit trails.

Conclusion

The AADSTS700054 error is a preventable configuration issue in Azure AD. By enabling implicit flow and ID tokens judiciously, teams can ensure seamless authentication while maintaining security. For further details, refer to Microsoft’s OAuth 2.0 implicit grant documentation.