Modernizing Enterprise Application Policies in Microsoft Entra ID

Securing the App Ecosystem through Enhanced Restrictions and Service Principal Governance

As organizations increasingly rely on SaaS and third-party integrations, the complexity of managing application identities has grown. Microsoft has introduced significant changes to Entra ID to tighten how applications interact with your data. This article outlines the critical 2026 enforcement deadlines for service principal governance and the latest policy restrictions available to IT administrators.

Overview

Enterprise application policies in Microsoft Entra ID are the primary mechanism for controlling how third-party and custom-built applications access organizational resources. The core innovation in recent updates is the move toward Mandatory Service Principal Governance. Historically, certain multitenant applications could authenticate without a local service principal (SP-less authentication). By March 31, 2026, this “blind spot” will be closed, requiring every application to have a formal, auditable identity within the resource tenant.

Key Benefits

Benefit	Capability	Business Value
Complete Visibility	Mandatory Service Principals	Ensures every app has an auditable object in your directory for tracking and revoking access.
Credential Hygiene	App Management Policies	Prevents developers from using insecure secrets or long-lived certificates in production.
Risk Mitigation	Verified Publisher Requirements	Blocks high-risk, unverified applications from requesting sensitive data permissions.
Automated Guardrails	Conditional Access for Workloads	Extends Zero Trust to non-human identities, blocking compromised apps in real-time.

Critical Update: Retirement of SP-Less Auth

The most significant shift for 2026 is the retirement of Service Principal-Less Authentication.

Deadline: March 31, 2026.
Impact: Applications that currently authenticate without a local service principal (using only the application ID from the home tenant) will fail.
Action Required: Admins must identify these applications using Sign-in logs and register them formally.

Identifying Impacted Apps

Navigate to Identity > Monitoring & health > Sign-in logs. Use the Service principal sign-ins tab and filter for: Service principal ID: 00000000-0000-0000-0000-000000000000

Application Management Policy Restrictions

Admins can now enforce tenant-wide restrictions on how application registrations and enterprise apps are configured. These are managed via Application Management Policies.

Feature	Capability	Impact
Password Restrictions	Blocks the use of client secrets or enforces short lifetimes.	Eliminates “forever” secrets that are prone to leakage.
Certificate Restrictions	Limits asymmetric key lifetimes (e.g., max 1 or 2 years).	Forces regular rotation of high-privilege credentials.
Identifier URI Blocks	Restricts non-default URIs (api://) or non-verified domains.	Prevents brand impersonation and “Shadow IT” apps.

Implementation Example: Restricting Credentials

To enforce these restrictions, administrators can use Microsoft Graph PowerShell to apply a policy that blocks new password credentials for all applications except a specific exclusion group.

# Create an App Management Policy to block new secrets
$params = @{
    displayName = "Production Secret Restriction Policy"
    description = "Restricts the addition of password credentials in production"
    isEnabled = $true
    restrictions = @{
        passwordCredentials = @{
            isAdditionAllowed = $false
        }
    }
}
New-MgPolicyApplicationManagementPolicy -BodyParameter $params