A family of Microsoft on-premises document management and storage systems.
Hi @SR VSP ,
I could also reproduce this scenario in my tenant, the External Sharing was set to "New and existing guests" when creating a Team Site with group. As far as I know, It is by default in SharePoint Online and currently there is not any kind of workaround to change the default option form "New and existing guests" to "Only people in your organization".
I found a user voice which has the same requirement as you: Set the external sharing for team site when creating team sites. You can upvote it there. It is a place for customers provide feedback about Microsoft SharePoint products. What's more, if a feedback is high voted there by other customers, it will be promising that Microsoft Product Team will take it into consideration when designing the next version in the future.
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