Update (12/21/2013): take a note that Password Sync feature of DirSync is not compatible with Active Directory that has been configured for FIPS: More information at - http://technet.microsoft.com/en-us/library/dn246918.aspx . The following provides additional information on the details of FIPS implementation: http://support.microsoft.com/kb/811833 http://technet.microsoft.com/en-us/library/dn246918.aspx Windows Azure Active Directory (WAAD) Synchronization Tool (DirSync) that supports password synchronization is now available: More information - http://bit.ly/11d7UDd Installation, upgrade and download instructions - http://bit.ly/XIs65a And here’s a good write-up on the subject - http://bit.ly/14o73S5 .