Exchange Online Groups: Distribution vs. Mail-Enabled Security Explained Simply

Confusion is inevitable as soon as Exchange mailboxes, synchronised group objects and cloud-only instances exist side by side. Distribution Groups, Mail-Enabled Security Groups and Dynamic Distribution Groups share the same technical foundation. However, they serve different purposes and follow different management rules. Anyone wanting to maintain an overview in Exchange and Exchange Online must understand the intended use, management environment, and system boundaries precisely.

Even small differences between cloud-only and synchronised groups often lead to management issues, especially when multiple portals are used. A modern cloud solution such as my-IAM can help by consolidating central management functions.

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Distribution Groups: the classic email option with limited responsibility

Distribution Groups (mailing lists) are static email groups. They have existed since the early generations of Exchange and serve exclusively for message delivery. A sender addresses a distribution group, and all assigned members receive the message as a direct copy. The group has no own mailbox, no history, no calendar. It is managed in the Exchange Admin Center, locally or online.

In Exchange Online, Distribution Groups can be created, edited, moderated, or deleted via the EAC or PowerShell. They support external senders (if explicitly allowed), delivery restrictions, sender limitations, approvals and delegation functions. Technically, they are objects in Entra ID, but their management is entirely handled through Exchange.

⚠️ However, as soon as Entra ID synchronisation with a local Active Directory is involved, responsibility becomes fragmented. Changes can then only be made in the local Active Directory.
Distribution Groups cannot be managed directly in Entra ID, which complicates central administration when cloud-only strategies are desired.

Dynamic Distribution Groups: flexible but slow

Dynamic Distribution Groups are Distribution Groups with recipient filters. Instead of static memberships, rules define who belongs to them. The membership list is generated once a day, a clear disadvantage compared to real-time logic in Entra ID. Exchange Online limits the number of these groups to 3,000 (as of April 2025, Office 365 IT Pros Blog). Management is only possible via the Exchange Admin Center or PowerShell, there is no integration with the Microsoft 365 Admin Center, Teams or SharePoint.

The limitations not only affect the update frequency. Transport rules, moderation or approval processes also work with the cached list, not with current AD attributes. Faulty filter conditions, inconsistent AD entries or incorrect UPN assignments can quickly lead to mail delivery errors or unintended recipient lists.

Mail-Enabled Security Groups: access control with delivery options

Mail-Enabled Security Groups combine two worlds. They are based on security groups in AD, additionally have an email address, and can be used like distribution lists. They are designed for scenarios where users need to receive permissions to resources and communicate within a group, such as “Procurement EU”, “Controlling North”, or “IT Support Site X”.

Unlike pure distribution lists, Mail-Enabled Security Groups can also manage SharePoint access, Exchange permissions or Teams memberships. However, devices cannot be managed in this way: a key difference compared to classic Entra security groups. Management is done via the Exchange Admin Center or PowerShell.

They are also subject to the restrictions caused by synchronisation between AD and Entra ID. Synchronised group objects are no longer editable in Exchange Online. Group members, owners or settings can then only be changed in the local AD.

Mail-Enabled Security Groups and Dynamic Distribution Groups at a glance

Management conflicts in hybrid environments

In hybrid environments, systemic breaks occur:
Exchange Online displays all synchronised groups but offers no editing options. Users with the “MyDistributionGroups” role encounter error messages as soon as they attempt to modify DirSync groups, even if the GUI indicates they are authorised to do so.

🤯 A typical issue: departments are supposed to continue managing their groups independently but lose all editing rights after migration to the cloud.

Interactions with Outlook or OWA also cause confusion. Cloud-only groups can be edited there, but DirSync objects cannot. Management options appear context-dependent, inconsistent and difficult to control. The Entra Admin Center does not help here – it is clearly designed for IT administrators. For support staff or business users, it is unsuitable. Errors in operation, incomplete changes or incorrect group logic are common in practice.

👉 This is where our IDM-Portal and the my-IAM platform come in:

Central management: Authorised departments can maintain both local and cloud groups via a unified portal, without switching between Exchange Admin Center, Microsoft 365 Admin Center or ADUC.

Self-service: Employees or group owners can add or remove members, or adjust permissions – even for Exchange Online groups – without requiring deep Exchange knowledge.

Automated processes: New employees automatically receive the correct group memberships, including cloud-only and hybrid groups, based on predefined rules.

Auditability & compliance: All changes are logged, approvals and expiry dates can be managed centrally.

Avoid hybrid conflicts: Synchronised groups remain consistent between AD and Exchange Online, while cloud-only groups can be maintained flexibly – increasing clarity and reducing sources of error.

This enables companies to manage hybrid and cloud environments efficiently, strengthen collaboration between departments and significantly reduce administrative effort.

Best practices for handling Distribution and Mail-Enabled Security Groups

The most important principle is that responsibility and management path must be congruent. If departments are expected to maintain their groups, these groups must be created in the cloud as cloud-only objects. Synchronised groups, on the other hand, are systemically bound to the local AD.

For classic distribution lists, the use of dedicated owners is recommended, who can make changes via the EAC or with my-IAM:

• Manage members,
• allow external senders,
• assign delegates.

For mail-enabled security groups, it should be clearly defined whether they are primarily intended for permissions or for communication. Managing both at once is more complex and error-prone. Dynamic groups should only be used where regular mailings are required – not for critical access control or project-related collaboration.

When initially creating groups in Microsoft Entra ID, particular care is required because the chosen group type cannot be changed afterwards. This particularly affects mail-enabled security groups, which can be included in email communication but cannot manage devices and are not suitable for dynamic membership. Distribution groups, though technically related, cannot be managed in the Entra Admin Center – they remain exclusively within the Exchange Admin Center. Another risk arises from nested groups.

Changes in parent groups can have unforeseen effects on member structures in dependent groups. In addition, fragmented portal access (Entra Admin Center, EAC, M365 Admin Center) makes consistent management difficult. Inexperienced users quickly reach their limits here, which is why structured role assignments and coordinated ownership concepts are essential. The ability to require owner approval for group memberships should not be underestimated – without such processes, many groups remain static, wrongly assigned, or abandoned.

Automated group memberships

Exchange groups are only reliable if they always contain the right members at the right time. In practice, this is rarely the case – departmental changes, new employees, or delayed removals quickly lead to errors and security risks.

my-IAM RealGroup closes this gap. The solution updates group memberships automatically and across systems as soon as relevant attributes change in any connected system (e.g. AD, Entra ID or HR system) – such as department, location or role. This ensures that distribution and mail-enabled security groups remain up to date, without manual maintenance.

In combination with the IDM-Portal, organisations gain a central, user-friendly interface that also enables departments to manage their AD and Entra ID groups securely – easily, quickly and compliantly.

Conclusion

Distribution Groups and Mail-Enabled Security Groups remain key components in Exchange and Exchange Online. However, their management is fragmented and depends on sync status and admin model.

Those who want clarity and security need clear processes, well-defined responsibilities and an interface that supports all involved parties effectively. This enables efficient group management, traceable changes and secure permissions – without confusion between local, synchronised and cloud-only objects.

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More about the my-IAM platform

The my-IAM platform unites all identities from various source systems and makes them available for applications and apps of any kind. In addition to the Teams-integrated app my-IAM PeopleConnect, it includes the business services my-IAM RealIdentity and my-IAM RealGroup.

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You can also reach our team by phone at
+49 8196 998 4330.