Configure a team with security isolation by using a unique sensitivity label

This article provides you with recommendations and steps to configure a private team in Microsoft Teams and use a unique sensitivity label to encrypt files so that only team members can decrypt them.

Beyond the private access, this article describes how to configure the associated SharePoint site, which you can access from the Files section of a team channel, for the additional security needed to store highly regulated data.

The elements of configuration for a team with security isolation are:

  • A private team
  • Additional security on the associated SharePoint site for the team that:
    • Prevents members of the site from sharing the site with others.
    • Prevents non-members of the site from requesting access to the site.
  • A sensitivity label specifically for this team that:
    • Prevents access to SharePoint content from unmanaged devices
    • Allows or denies guest access to the team, depending on your requirements
    • Encrypts documents to which the label is applied


Be sure you have enabled sensitivity labels to protect content in Microsoft Teams, Office 365 groups, and SharePoint sites before you proceed with the steps in this article.

Watch this video for an overview of the deployment process.

For a 1-page summary of this scenario, see the Microsoft Teams with security isolation poster.

Microsoft Teams with security isolation poster.

You can also download this poster in PDF or PowerPoint formats and print it on letter, legal, or tabloid (11 x 17) size paper.

Try this configuration in your own test lab environment with these instructions.

See how the Contoso Corporation used an isolated team for a top-secret project in this case study.

Initial protections

To help protect access to the team and its underlying SharePoint site, review the following best practices:

Guest sharing

Depending on the nature of your business, you may or may not want to enable guest sharing for this team. If you do plan to collaborate with people outside your organization in the team, enable guest sharing.

For details about sharing with guests securely, see the following resources:

To allow or block guest sharing, we use a combination of a sensitivity label for the team and site-level sharing controls for the associated SharePoint site, both discussed later.

Create a private team

Since we are creating a sensitivity label specifically for this team, the next step is to create the team. If you have an existing team, you can use that.

To create a team for sensitive information

  1. In Teams, click Teams on the left side of the app, then click Join or create a team at the bottom of the teams list.
  2. Click Create team (first card, top left corner).
  3. Choose Build a team from scratch.
  4. In the Sensitivity list, keep the default.
  5. Under Privacy, click Private.
  6. Type a name for the team that is related to your sensitive project. For example, Project Saturn.
  7. Click Create.
  8. Add users to the team, and then click Close.

Private channel settings

We recommend restricting creating private channels to team owners.

To restrict private channel creation

  1. In the team, click More options, and then click Manage team.
  2. On the Settings tab, expand Member permissions.
  3. Clear the Allow members to create private channels check box.

You can also use teams policies to control who can create private channels.

Create a sensitivity label

To configure a team for security isolation, we'll be using a sensitivity label created specifically for this team. This label is used at the team level to control guest sharing and to block access from unmanaged devices. It can also be used to classify and encrypt individual files in the team so that only team owners and members can open them.

If you have an internal partner or stakeholder group who should be able to view encrypted documents but not edit them, you can add them to the label with view-only permissions. You can then add these people to the team's SharePoint site with Reader permissions, and they will have read-only access to the site where the documents are kept, but not the team itself.

To create a sensitivity label

  1. Open the Microsoft Purview compliance portal, and under Solutions, select Information protection.
  2. Click Create a label.
  3. Give the label a name. We suggest naming it after the team that you'll be using it with.
  4. Add a display name and description, and then click Next.
  5. On the Define the scope for this label page, select Files & emails and Groups & sites and click Next.
  6. On the Choose protection settings for files and emails page, select Encrypt files and emails, and then click Next.
  7. On the Encryption page, choose Configure encryption settings.
  8. Click Add users or groups, select the team that you created, and then click Add
  9. Click Choose permissions.
  10. Choose Co-Author from the dropdown list, and then click Save.
  11. If you want to include users or groups with read-only access to files with the label:
    1. Click Assign permissions.
    2. Click Add users or groups, select the users or groups that you want to add, and then click Add.
    3. Click Choose permissions.
    4. Choose Viewer from the dropdown list, and then click Save.
  12. Click Save, and then click Next.
  13. On the Auto-labeling for files and emails* page, click Next.
  14. On the Define protection settings for groups and sites page, select Privacy and external user access settings and Device access and external sharing settings and click Next.
  15. On the Define privacy and external user access settings page, under Privacy, select the Private option.
  16. If you want to allow guest access, under External user access, select Let Microsoft 365 Group owners add people outside your organization to the group as guests.
  17. Click Next.
  18. On the Define external sharing and device access settings page, select Control external sharing from labeled SharePoint sites.
  19. Under Content can be shared with, choose New and existing guests if you're allowing guest access or Only people in your organization if not.
  20. Under Access from unmanaged devices, choose Block access.
  21. Click Next.
  22. On the Auto-labeling for database columns page, click Next.
  23. Click Create label, and then click Done.

Once you've created the label, you need to publish it to the users who will use it. In this case, we'll make the label available only to people in the team.

To publish a sensitivity label:

  1. In the Microsoft Purview compliance portal, on the Information protection page, choose the Label policies tab.
  2. Click Publish labels.
  3. On the Choose sensitivity labels to publish page, click Choose sensitivity labels to publish.
  4. Select the label that you created, and then click Add.
  5. Click Next.
  6. On the Publish to users and groups page, click Choose users and groups.
  7. Click Add, and then select the team that you created.
  8. Click Add, and then click Done.
  9. Click Next.
  10. On the Policy settings page, select the Users must provide justification to remove a label or lower classification label check box, and then click Next.
  11. Type a name for the policy, and then click Next.
  12. Click Submit and then click Done.

Apply the label to the team

Once the label has been published, you must apply it to the team in order for the guest sharing and managed devices settings to take effect. This is done in the SharePoint admin center. Note, it may take some time for the label to become available after it's been published.

To apply the sensitivity label

  1. Open the SharePoint admin center, and under Sites, select Active sites.
  2. Select the site that is associated with team.
  3. On the Policies tab, under Sensitivity, select Edit.
  4. Select the label that you created, and then select Save.

SharePoint settings

There are three steps to do in SharePoint:

  • Update the guest sharing settings for the site in the SharePoint admin center to match what you chose when you created the label, and update the default sharing link to People with existing access.
  • Update the site sharing settings in the site itself to prevent members from sharing files, folders, or the site, and turn off access requests.
  • If you added people or groups to the label with Viewer permissions, you can add them to the SharePoint site with Read permissions.

SharePoint guest settings

The guest sharing setting that you chose when you created the label (which only affects team membership) should match the guest sharing settings for the associated SharePoint site as follows:

Label setting SharePoint site setting
Let Office 365 group owners add people outside the organization to the group selected New and existing guests (default for new teams)
Let Office 365 group owners add people outside the organization to the group not selected Only people in your organization

We'll also update the default sharing link type to reduce the risk of accidentally sharing files and folders to a wider audience than intended.

To update site settings

  1. Open the SharePoint admin center, and under Sites, select Active sites
  2. Select the site that is associated with team.
  3. On the Policies tab, under External sharing, select Edit.
  4. If you allowed guest sharing when you created the sensitive label, ensure that New and existing guests is selected. If you didn't allow sharing when you created the label, choose Only people in your organization.
  5. Under Default sharing link type, clear the Same as organization-level setting check box, and select People with existing access.
  6. Select Save.

Private channels

If you add private channels to the team, each private channel creates a new SharePoint site with the default sharing settings. These sites are not visible in the SharePoint admin center, so you must use the Set-SPOSite PowerShell cmdlet with the following parameters to update the guest sharing settings:

  • -SharingCapability Disabled to turn off guest sharing (it's on by default)
  • -DefaultSharingLinkType Internal to change the default sharing link to Specific people

If you don't plan to use private channels with your team, consider turning off the ability for team members to create them under Member permissions in team settings.

Site sharing settings

To help ensure that the SharePoint site does not get shared with people who are not members of the team, we limit such sharing to owners. We also limit sharing of files and folders to team owners. This helps ensure that owners are aware whenever a file is shared with someone outside the team.

To configure owners-only site sharing

  1. In Teams, navigate to the General tab of the team you want to update.
  2. In the tool bar for the team, click Files.
  3. Click the ellipsis, and then click Open in SharePoint.
  4. In the tool bar of the underlying SharePoint site, click the settings icon, and then click Site permissions.
  5. In the Site permissions pane, under Sharing Settings, click Change sharing settings.
  6. Under Sharing permissions, choose Only site owners can share files, folders, and the site, and then click Save.

Custom site permissions

If you added people with Viewer permissions to the sensitivity label, you can add them to the SharePoint site with Read access so they have easy access to the files.

To add users to the site

  1. In the site, click the settings icon, and then click Site permissions.
  2. Click Invite people, and then click Share site only.
  3. Type the names of the users and groups that you want to invite.
  4. For each person or group that you add, change their permissions from Edit to Read.
  5. Choose if you want to send them an email with a link to the site.
  6. Click Add.

Additional protections

Microsoft 365 offers additional methods for securing your content. Consider if the following options would help improve security for your organization.

Drive user adoption for team members

With the team in place, it's time to drive the adoption of this team and its additional security to team members.

Train your users

Members of the team can access the team and all of its resources, including chats, meetings, and other apps. When working with files from the Files section of a channel, members of the team should assign the sensitivity label to the files they create.

When the label gets applied to the file, it is encrypted. Members of the team can open it and collaborate in real time. If the file leaves the site and gets forwarded to a malicious user, they will have to supply credentials of a user account that is member of the team to open the file and view its contents.

Train your team members:

  • On the importance of using the new team for chats, meetings, files, and the other resources of the SharePoint site and the consequences of a highly regulated data leak, such as legal ramifications, regulatory fines, ransomware, or loss of competitive advantage.
  • How to access the team.
  • How to create new files on the site and upload new files stored locally.
  • How to label files with the correct sensitivity label for the team.
  • How the label protects files even when they are leaked off the site.

This training should include hands-on exercises so that your team members can experience these capabilities and their results.

Conduct periodic reviews of usage and address team member feedback

In the weeks after training:

  • Quickly address team member feedback and fine tune policies and configurations.
  • Analyze usage for the team and compare it with usage expectations.
  • Verify that highly regulated files have been properly labeled with the sensitivity label. (You can see which files have a label assigned by viewing a folder in SharePoint and adding the Sensitivity column through the Show/hide columns option of Add column.

Retrain your users as needed.

See also

Azure AD Privileged Identity Management