TFS 2010 web - access denied however user is logged in

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I have a TFS2010 server that has been installed in D:\Program Files\Microsoft Team Foundation Server 2010. I can connect fine to the web admin (http://localhost:17012/) however when i login to (http://localhost:8080) it gets passed the login prompt and says i am logged in however it displays access denied.

I am using app pool Wss3AppPool and when i go to the basic settings in IIS7 and click on test settings i get the following error under authorization.

The server is configured to use pass-through authentication with a built-in account to access the specified physical path. However, IIS Manager cannot verify whether the built-in account has access. Make sure that the application pool identity has Read access to the physical path. If this server is joined to a domain, and the application pool identity is NetworkService or LocalSystem, verify that \$ has Read access to the physical path. Then test these settings again.

I can connect to TFS fine using Visual Studio and everything seems to work but the web access login. We are not running sharepoint and the application pool for Wss3AppPool is running v2 classic.

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Pranav Singh On

Please try with ASP.NET 4.0 Classic app Pool with Authentication => Windows Authentication ON => providers =>remove negotiate ASP.NET Impersonation ON Anonymous Authentication OFF