Good question and your testing observation is correct. Once on-premises AD groups are synced to Entra ID via Microsoft Entra Connect (formerly Azure AD Connect), Power Platform sees them as Entra ID security groups, not as on-premises groups. The Microsoft docs warning against "on-premises Windows AD security groups" refers to groups that only exist on-premises and have not been synced. Synced groups are a different object type in Entra ID and do work as environment security groups, which matches what you found in testing.
be aware of:
1. Sync delay. Changes made on-premises (adding or removing users from the group) do not reflect in Entra ID and therefore Power Platform immediately. Entra Connect sync runs on a schedule (default 30 minutes). During that window users may still have access they should not, or may lose access before the sync completes.
2. Group type limitations. Entra Connect only syncs Security groups, not Distribution groups. Make sure your on-premises groups are Security groups, not Distribution lists.
3. Nested group behavior. Members of nested groups are not pre-provisioned in the environment. They get added at runtime when they first access the environment. This applies to all Entra ID groups but is worth knowing.
4. Group writeback. If you use group writeback (writing cloud changes back to on-premises), changes made directly in Entra ID to the synced group may be overwritten by the next sync from on-premises. This could cause unexpected access changes if someone edits the group in the cloud thinking it is cloud-managed.
5. Microsoft's documented recommendation is to use cloud-only Entra ID groups for Power Platform to avoid dependency on on-premises infrastructure. If your Entra Connect service has an outage or sync issue, membership changes are blocked until sync is restored.
For most hybrid organizations what you are doing is the standard approach and works well. Just make sure sync latency is acceptable for your security requirements and that your group type is Security.
Best regards,
Valantis
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