Copilot Studio connects to APIM MCP Server

Question

Copilot Studio connects to APIM MCP Server

Amy Zhang 40

We're trying to connect to APIM MCP server from Copilot Studio Tools, but we’re unsure how to configure the following fields:

(1) API Key (2) OAuth 2.0

The screenshot is below

User's image

Based on this page : Secure access to MCP servers in API Management

https://learn.microsoft.com/en-us/azure/api-management/secure-mcp-servers

It says ( My Notes )

You can secure either or both inbound access to the MCP server (from an MCP client to API Management) and outbound access (from API Management to the MCP server).

A) Secure inbound access

A1. Key-based authentication (APIM subscription key)

A2. Token-based authentication (OAuth 2.1 with Microsoft Entra ID)

B) Secure outbound access

B1. Steps to configure OAuth 2-based outbound access

Question

When Copilot connects to the APIM MCP server, how should I interpret the two authentication fields?

Is (1) API Key mapped to inbound access → A1 (subscription key)?
Is (2) OAuth 2.0 mapped to inbound access → A2, or is it meant for outbound access → B1?

In other words, does Copilot’s “API Key” strictly correspond to APIM’s subscription key for inbound calls, while “OAuth 2.0” is used for token-based inbound or outbound authentication?

Need your advice

Thank you

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1 answer

Your answer

Answer 1

Anurag Rohikar 3,190 Microsoft External Staff Moderator

Hello Amy Zhang,

When you connect Copilot Studio Tools to an APIM-hosted MCP server, the two authentication choices in Copilot’s configuration apply only to inbound authentication on APIM—not outbound.

API Key corresponds to key-based inbound access (APIM subscription key). Use your APIM subscription key here Copilot will include it as the Ocp-Apim-Subscription-Key header when calling the MCP endpoint.
OAuth 2.0 corresponds to token-based inbound access using Microsoft Entra ID (Azure AD). Use this if your APIM instance is secured with OAuth. You’ll provide your Client ID, Client Secret, Authorization URL, and Token URL from your Entra app registration.

Outbound authentication (APIM → backend MCP server) is configured within APIM itself, not in Copilot Studio. Choose either API Key or OAuth 2.0 based on how you secured your APIM endpoint don’t configure both unless APIM explicitly allows multiple methods.

References:

This setup ensures Copilot Studio authenticates properly with APIM while leaving outbound security entirely under APIM’s control.

I hope the above information helps. Please let us know if you have any further questions. Thank you!

Amy Zhang 40 Reputation points

2025-09-19T11:07:42.97+00:00

Hi @Anurag Rohikar ,

Thank you very much for your kind reply. I would like to confirm two points:

1. Subscription Key and OAuth 2.0 together

For an APIM-hosted MCP server, we are planning to enable both Subscription Key and OAuth 2.0. In Copilot Studio, how should we configure this? At the moment it seems only one method can be active at a time.

2. Passing human identity to backend MCP server

Our backend MCP server requires the actual user’s identity in order to perform authorization and data visibility checks. Currently, we are using Subscription Key + Entra ID OAuth 2.0 (grant type = client_credentials), which is application-to-application and does not carry any human identity.

May I ask if there is any recommended way to inject or propagate human identity authentication through the entire process, so the backend MCP server can enforce user-level authorization?

Thank you in advance for your guidance.
Anurag Rohikar 3,190 Reputation points Microsoft External Staff Moderator

2025-09-22T07:21:21.8166667+00:00
Hello Amy Zhang,

Thanks for your follow-up questions! Let’s address both points:

Using Subscription Key and OAuth 2.0 together
Copilot Studio can only be configured for one inbound authentication method at a time when connecting to an APIM-hosted MCP server. If APIM is set to require both Subscription Key and OAuth, you’ll need to configure APIM itself to enforce that combination:

In APIM, enable both subscription key validation and OAuth 2.0 (Microsoft Entra ID) on the API.

In Copilot Studio, select OAuth 2.0 as the authentication method and provide your Entra app details.

APIM will validate both the bearer token and the subscription key for each request.

To send the subscription key along with OAuth, add it manually as a header (Ocp-Apim-Subscription-Key) under the API settings for your MCP tool in Copilot Studio, if the UI allows custom headers. If not, you can enforce dual validation solely at the APIM policy level.

Propagating human identity to the backend MCP server
The client_credentials flow is application-to-application and won’t carry a human user’s claims. To propagate end-user identity so your backend MCP server can enforce user-level authorization:

Switch to or combine with a delegated flow such as authorization_code or on-behalf-of (OBO) in Microsoft Entra ID.

Use APIM’s Validate JWT policy to inspect and forward the user’s token. Configure APIM to pass the validated user token (or relevant claims) to the MCP backend in a header or token that your backend understands.

Ensure Copilot Studio is integrated with an identity provider that can issue tokens on behalf of the signed-in user, then pass that token to APIM instead of a pure app-only credential.

This approach ensures the backend sees the actual user identity, not just a service principal.

References:

Secure MCP servers in API Management

Validate JWT policy in APIM

Microsoft identity platform – On-behalf-of flow

Hope this clarifies both points and helps you set up end-to-end secure identity propagation. Thank you!
Anurag Rohikar 3,190 Reputation points Microsoft External Staff Moderator

2025-09-23T09:13:22.4033333+00:00

Hello, just checking to see if you have a chance to check my previous response and helped, do let me know if you have any further questions on this. Thank you!
Anurag Rohikar 3,190 Reputation points Microsoft External Staff Moderator

2025-09-24T07:57:01.8233333+00:00

Hello, Following up to see if you have a chance to check my previous response and helped, do let me know if you have any further questions on this. Thank you!
Amy Zhang 40 Reputation points

2025-10-01T03:29:41.85+00:00

Hi @Anurag Rohikar ,

Thanks for all the information, I can use on-behalf-of (OBO) flow to propagate human identity from Copilot Studio --> APIM-hosted MCP Server --> backend MCP server.

For reference, I’m also attaching a clear hands-on guide for OBO configuration:

https://www.youtube.com/watch?v=S2uYPgxBbMw

Thank you