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Hello @ninja,
Essentially Dynamics 365 On-prem supports Server-to-Server (S2S) auth.
For it, you need configure claims-based/IFD and Oauth protocol.
For sample, Onpremises works fine with Exchange Online/Sharepoint Online integration, using S2S auth.
Not totally sure about Application Users on this context, but S2S works.
Thanks Gustavo. This information helps me a lot.
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