Issue: Thunderbird fails at the authentication stage of adding an 0365 Exchange email account. Your email address and password are confirmed and correct. The issue is Exchange requires an Active Sync or EWS Exchange Web Services connection which ThunderBird doesn’t natively support.

Solution – install the ExQuilla for Microsoft Exchange and Exchange EWS Provider Add-Ons. ExQuilla connects email and contacts, Exchange EWS Provider connects the calendar.

Step 1 Email and Contacts – Install & Configure ExQuilla

Tools > Add-Ons
Search for and download the ExQuilla for Microsoft Exchange add-on. It does not show up until you click “show all results”
Go to Tools > ExQuilla for Microsoft Exchange
Enter your email address and password (check “remember password”
Click the “do auto discover” button which should automatically configure your account via Exchange Web Services (EWS) – https://outlook.office365.com/EWS/Exchange.asmx
Click Next
Done!
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If you encounter any issues (went smoothly here!)
1. Detailed install steps from ExQuilla
2. Detailed Exchange config steps from ExQuilla