building-identity-federation-with-saml-azure-ad

Establish SAML 2.0 identity federation between on-premises Active Directory and Azure AD (Microsoft Entra ID) for seamless cross-domain authentication and SSO to cloud applications.

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Repository: AgentFlocks/flocks
Last source activity: May 5, 2026 at 05:45
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name	building-identity-federation-with-saml-azure-ad
description	Establish SAML 2.0 identity federation between on-premises Active Directory and Azure AD (Microsoft Entra ID) for seamless cross-domain authentication and SSO to cloud applications.
domain	cybersecurity
subdomain	identity-access-management
tags	["saml","azure-ad","entra-id","federation","identity","sso","adfs","hybrid-identity"]
version	1.0
author	mahipal
license	Apache-2.0
nist_csf	["PR.AA-01","PR.AA-02","PR.AA-05","PR.AA-06"]

Building Identity Federation with SAML Azure AD

Overview

Identity federation enables users authenticated by one identity provider to access resources managed by another without maintaining separate credentials. This skill covers establishing SAML 2.0 federation between an organization's on-premises Active Directory (via AD FS or third-party IdP) and Microsoft Entra ID (formerly Azure AD), as well as configuring federated SSO for third-party SaaS applications. Federation eliminates password synchronization concerns and keeps authentication authority on-premises while extending SSO to cloud resources.

When to Use

When deploying or configuring building identity federation with saml azure ad capabilities in your environment
When establishing security controls aligned to compliance requirements
When building or improving security architecture for this domain
When conducting security assessments that require this implementation

Prerequisites

On-premises Active Directory domain
AD FS 2019+ or third-party SAML IdP (Okta, Ping, etc.)
Microsoft Entra ID tenant (P1 or P2 license recommended)
Azure AD Connect (if using hybrid identity with password hash sync as backup)
Public TLS certificate for federation endpoint
DNS records for federation service name

Core Concepts

Federation Models

Model	Authentication Authority	Use Case
Federated (AD FS)	On-premises AD FS	Regulatory requirement to keep auth on-prem
Managed (PHS)	Azure AD with password hash sync	Simplest cloud auth, AD FS not needed
Managed (PTA)	On-premises via pass-through agent	Cloud auth validated against on-prem AD
Third-Party Federation	External IdP (Okta, Ping)	Multi-IdP environment

SAML Federation Architecture

User → Cloud App (SP)
   │
   └── Redirect to Azure AD
          │
          ├── Azure AD checks federated domain
          │
          └── Redirect to on-premises AD FS
                 │
                 ├── AD FS authenticates against Active Directory
                 │
                 ├── AD FS issues SAML token
                 │
                 └── Token posted back to Azure AD
                        │
                        ├── Azure AD validates federation trust
                        │
                        ├── Azure AD issues its own token
                        │
                        └── User receives access token for cloud app

Component	Description
Token-Signing Certificate	X.509 certificate used by IdP to sign SAML assertions
Federation Metadata	XML document describing IdP endpoints and capabilities
Relying Party Trust	Configuration in AD FS for each SP (Azure AD)
Claims Rules	Transform AD attributes into SAML claims
Issuer URI	Unique identifier for the IdP (entity ID)

# Install AD FS role
Install-WindowsFeature ADFS-Federation -IncludeManagementTools

# Configure AD FS farm
Install-AdfsFarm `
    -CertificateThumbprint $certThumbprint `
    -FederationServiceDisplayName "Corp Federation Service" `
    -FederationServiceName "fs.corp.example.com" `
    -ServiceAccountCredential $gmsaCredential

# Verify AD FS is operational
Get-AdfsProperties | Select-Object HostName, Identifier, FederationPassiveAddress

# Install Microsoft Graph PowerShell module
Install-Module Microsoft.Graph -Scope CurrentUser

# Connect to Microsoft Graph
Connect-MgGraph -Scopes "Domain.ReadWrite.All"

# Convert managed domain to federated
# Using AD FS federation metadata URL
$domainId = "corp.example.com"
$federationConfig = @{
    issuerUri = "http://fs.corp.example.com/adfs/services/trust"
    metadataExchangeUri = "https://fs.corp.example.com/adfs/services/trust/mex"
    passiveSignInUri = "https://fs.corp.example.com/adfs/ls/"
    signOutUri = "https://fs.corp.example.com/adfs/ls/?wa=wsignout1.0"
    signingCertificate = $base64Cert
    preferredAuthenticationProtocol = "saml"
}

# Apply federation settings to domain
New-MgDomainFederationConfiguration -DomainId $domainId -BodyParameter $federationConfig

# Add Relying Party Trust for Azure AD
Add-AdfsRelyingPartyTrust `
    -Name "Microsoft Office 365 Identity Platform" `
    -MetadataUrl "https://nexus.microsoftonline-p.com/federationmetadata/2007-06/federationmetadata.xml"

# Configure claim rules
$rules = @"
@RuleTemplate = "LdapClaims"
@RuleName = "Extract AD Attributes"
c:[Type == "http://schemas.microsoft.com/ws/2008/06/identity/claims/windowsaccountname",
   Issuer == "AD AUTHORITY"]
=> issue(store = "Active Directory",
   types = ("http://schemas.xmlsoap.org/claims/UPN",
            "http://schemas.xmlsoap.org/ws/2005/05/identity/claims/emailaddress",
            "http://schemas.xmlsoap.org/ws/2005/05/identity/claims/givenname",
            "http://schemas.xmlsoap.org/ws/2005/05/identity/claims/surname"),
   query = ";userPrincipalName,mail,givenName,sn;{0}",
   param = c.Value);

@RuleTemplate = "PassThroughClaims"
@RuleName = "Pass Through UPN as NameID"
c:[Type == "http://schemas.xmlsoap.org/claims/UPN"]
=> issue(Type = "http://schemas.xmlsoap.org/ws/2005/05/identity/claims/nameidentifier",
   Issuer = c.Issuer, OriginalIssuer = c.OriginalIssuer,
   Value = c.Value,
   ValueType = c.ValueType,
   Properties["http://schemas.xmlsoap.org/ws/2005/05/identity/claimproperties/format"]
       = "urn:oasis:names:tc:SAML:2.0:nameid-format:persistent");
"@

Set-AdfsRelyingPartyTrust `
    -TargetName "Microsoft Office 365 Identity Platform" `
    -IssuanceTransformRules $rules

# Check current certificate expiration
Get-AdfsCertificate -CertificateType Token-Signing | Select-Object Thumbprint, NotAfter

# AD FS supports auto-rollover (enabled by default)
Get-AdfsProperties | Select-Object AutoCertificateRollover

# If manual rotation is needed:
# 1. Add new certificate as secondary
Set-AdfsCertificate -CertificateType Token-Signing -Thumbprint $newThumbprint -IsPrimary $false
# 2. Update Azure AD with new certificate
# 3. Promote to primary
Set-AdfsCertificate -CertificateType Token-Signing -Thumbprint $newThumbprint -IsPrimary $true
# 4. Remove old certificate
Remove-AdfsCertificate -CertificateType Token-Signing -Thumbprint $oldThumbprint