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Windows Telnet is not working

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I was working on an issue where users were unable to telnet to a Unix server from the Windows box. Customer was using the default telnet service which comes with Windows 2003. He was getting the following error when trying to connect:

“Failure in initializing the telnet session. Shell process may not have been launched. Telnet Server has closed the connection. Connection to host lost. ”

Windows Event logs shows the following error message:

Event Type: Error
Event Source: TlntSvr
Event Category: None
Event ID: 4049
Date: 3/24/2010
Time: 6:04:35 PM
User: N/A
Computer: INAW2119
Description:
Error in creating CMD proces. System Error: A required privilege is not held by the client.

Troubleshooting steps:

  • We first install the hotfix https://support.microsoft.com/kb/935761 but it did not resolve the issue.
  • We also tried the steps in https://support.microsoft.com/kb/309523 bit even it did not work.
  • Confirm that Secondary Logon service is set to automatic and it is started.
  • Change the service account for Telnet Service from Local Service to Local System account and then restart telnet service.
  • Run “unset ntlm” from the telnet prompt to set authentication to logon/password prompt.

The above steps resolve the issue and telnet started working perfectly.