@Manoj Chauhan - Thank you for reaching Microsft QnA support
From screenshot the two required registry values exist under HKLM\SOFTWARE\FSLogix\Profiles (Enabled=1 and a VHDLocations UNC)
Microsoft’s documented requirements for profile containers - Configuration Setting Reference
C:\Program Files\FSLogix\Apps\frxtray.exe shows a green status and the user as “Logged in – Profile” rather than “Inactive”.
The share path in VHDLocations is reachable and browsable from that host under the user’s context (use runas /user:domain\user "explorer.exe" or log on with a local profile and test)
Store FSLogix profile containers on Azure Files and Active Directory Domain Services or Microsoft Entra Domain Services - Store FSLogix profile containers on Azure Files and Active Directory Domain Services or Microsoft Entra Domain Services
If frxtray is inactive or the share is not reachable from that user context, FSLogix will skip attaching and Windows will create a local profile -
Why my FSLogix profile is not being created or loaded?
FSLogix will not attach a container if a standard local profile is already present for that user.
We can suggest trying: Delete the user’s local profile via System Properties > Advanced > User Profiles (do not just delete the folder) and log in again.
Optionally set DeleteLocalProfileWhenVHDShouldApply=1 under HKLM\SOFTWARE\FSLogix\Profiles so FSLogix automatically removes any matching local profile when it should attach a container
If you use FSLogix Profile Include List / Exclude List (Group Policy or registry), make sure the users or groups are in the Include list (or those settings are not configured at all) and if an exclude list applies, FSLogix will intentionally skip the user, and you will see only a local profile
Even if users can browse the share from another machine, the session host’s computer or you may not actually have NTFS and share rights required for container folders and VHDX creation.
For domain‑joined AVD with Azure Files: Microsoft requires at minimum:
Share “Storage File Data SMB Share Contributor” (or equivalent) for the user/group.
NTFS: User has Full Control on their own profile folder; at root, typically “Creator Owner – Full control (subfolders and files only)” and users are not granted list access to other users’ folders. Re-test by creating a folder and a dummy file in the exact path under the affected user account.
AVD + domain join vs Entra‑only:
Since your VMs are classic domain‑joined, should follow the “FSLogix with Azure Files and Active Directory” guidance; please check you are not mixing in the Entra‑only configuration (which uses a different auth path).
Prerequisites for Virtual Desktop
Microsoft Entra joined session hosts in Azure Virtual Desktop
Regards
Himanshu