As a workaround, replace the users and groups you are trying to add with a single group, in the same operation, and then click Save again. If you see an error when you try to save, the cause might be due to the number of users or groups being added. Under the method FIDO2 Security Key, choose the following options: Enable - Yes or No You could do that by going to Azure Active Directory > Security > Authentication methods > Authentication method policy.

I believe you have already enabled passwordless authentication using security key however I would still request you to verify it as per the article Passwordless security key sign-in - Azure Active Directory. You may manually import a certificate to the Yubikey. Some functions may need intervention of your company IT admins if this is not a lab environment where you are trying this. If you are in a environment where your machine is in on-premise active directory and you have an internal PKI infrastructure then you will need to get your Yubikey a certificate issued from your corporate PKI server. I would recommend you to also go through the article about how to go about installation of the driver. If you do not have Yubikey drivers then you can download the tools here. Macke sure you are not using generic Microsoft Drivers. Similarly you should see Yubikey's drivers. Ideally Windows update should automatically download the YubiKey smartcard driver but sometimes it may not happen. In my windows 10 machine it shows as below because I use a different smartcard. Go to the startmenu and press the windows key -> Start > type devmgmt.msc and check the Smart card readers section. In order to rule this out, could you please go to the device manager on windows box. The issue mostly in this case would be that the driver is not able to read the smartcard for the certificates.

We have seen this error occuring if you do not have YubiKey drivers installed on the windows 10 box and are using any other driver or Microsoft provided general driver which helps read the smartcard. In your case, I understand that you are trying to logon to a windows 10 machine using Yubikey and have setup the Security Key as a valid authentication method in the users profile and on the portal.

Yubikey 4 fido2