Hi @Credoffice Support
Thank you for posting your issue on Microsoft Q&A.
I understand that you are working on mailboxes received from Microsoft with Mailkit IMAP and you have done the configuration with OAuth2 but during the authentication you get an "Authentication failed" exception.
There is no plan for Outlook clients to support OAuth for POP and IMAP, but Outlook can connect use MAPI/HTTP (Windows clients) and EWS (Outlook for Mac).
If you're using POP/IMAP and SMTP for an Exchange Online account in Outlook, you must enable Basic authentication for these protocols (until it's permanently deprecated in October 1). To do so, disable Microsoft Entra security defaults if they're enabled.
Follow the document for more information: https://learn.microsoft.com/en-us/exchange/troubleshoot/administration/cannot-connect-mailbox-pop-imap-outlook?source=recommendations
Hope this helps. Do let us know if you have any further queries.
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Thanks,
B. Siri Chandana.