SMTP Connectors | Exchange 2007

Microsoft has split connectors in Exchange 2007 into Receive Connectors and Send Connectors.

This transition to a separate send/receive configuration scheme makes it a lot easier to tell Exchange how you want it to behave, while minimizing the chances that you're going to change a parameter and cause unintended consequences.

By default, when you install the Exchange Hub Transport role, it creates two default receive connectors. If you've installed Exchange 2007 into an existing environment with 2003, then you probably already have a Send Connector (SMTP Connector).
While Receive connectors represent an inbound connection point for SMTP, Send connectors relay outbound communications.

The two default receive connectors are configured for authenticated SMTP transactions only.
The "Default" receive connector on Hub is configured for other Exchange servers to authenticate, but it does not accept anonymous email by default.

So users receive the following NDR when they try to send mail from any external address:

This is an automatically generated Delivery Status Notification

Delivery to the following recipient failed permanently:

test@Ex2007domain.com

Technical details of permanent failure:
PERM_FAILURE: SMTP Error (state 12): 530 5.7.1 Client was not authenticated

The easiest way to address this is to add the "Anonymous users" on the Default Receive Connector.

Here is an excellent MSExchange Team Blog for Configuring Exchange 2007 Hub Transport role to receive Internet mail.

Public Folders not able to receive External Emails

When we set the Mail Enabled Public Folders, it receive all the internal emails fine but is unable to receive any mail from outside and throws the NDR to the sender:

This is an automatically generated Delivery Status Notification.

Delivery to the following recipients failed.
abc@xyz.com

Final-Recipient: rfc822;abc@xyz.com
Action: failedStatus: 5.2.1
X-Display-Name: abc

This happens when Permission to Anonymous is set to None. Make sure Anonymous has atleast Contributor rights.