Hi @JQ,
Based on your query, I understand that you would like to add external IDP to Entra External tenant with your requirements on Assertion value and encrypted tokens.
As per my research with the above requirement, I have found Microsoft document: Add federation with SAML/WS-Fed identity providers which talks about adding external SAML IDP with Entra external ID.
In this document it has confirmed that Entra External ID supports only this as assertion consumer URL: https://<tenantID>.ciamlogin.com/login.srf
in response and may not be able to use External assertion URLs. I also found that the Microsoft Entra SAML/WS-Fed federation feature doesn't support sending a signed authentication token to the SAML identity provider. This has been confirmed here: Signed authentication tokens.
I believe your requirements may not be fulfilled by checking on this information. But I found a tech community blog where the member has added OKTA as IDP with external IDP with OKTA assertion values. Here is the blog: Entra ID SAML Federation with an External Identity Provider
The blog specifies: Entra ID does not forward or share SAML assertions received from the external IdP directly with the application. Instead, Entra ID extracts claims from the attributes of the guest user profile in Entra ID.
Note: I have provided the blog is just for your reference if you would like to give a try on the same. Microsoft did not hold any responsibility on the blog documents.
I hope this information is helpful. Please feel free to reach out if you have any further questions.
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