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A local domain with Active Directory is an on-premises infrastructure hosted inside the organization using physical or virtual Windows Servers. Active Directory manages users, computers, groups, permissions, printers, and policies within the company network. Devices joined to the local domain authenticate against domain controllers located inside the organization. Microsoft 365, on the other hand, uses cloud identity services through Microsoft Entra ID, previously known as Azure Active Directory. Local Active Directory mainly focuses on internal network management and Group Policy control, while Microsoft 365 focuses on cloud applications, internet-based authentication, and remote accessibility. Active Directory works best in environments where organizations need strong control over local devices and servers. Microsoft 365 is better for mobility and cloud collaboration. Many companies still use both because some legacy systems and network resources depend on traditional domain environments that cloud-only solutions cannot fully replace.