Yes, Windows 365 Enterprise can use an Azure Network Connection (ANC) with a customer-managed Azure virtual network, as long as the Azure subscription and Windows 365 environment meet the ANC requirements. An Azure subscription and VNet are required when you choose the ANC deployment option.
However, the screenshot doesn't currently show that Azure Policy is blocking you.
The Policy → Assignments page shows:
Total Assignments: 0
Policy Assignments: 0
means there are no policy assignments visible at that subscription scope. More importantly, the VNet creation screen is reporting:
Deployment validation failed
Additional details from the underlying API...
We need the underlying validation error before determining whether this is a trial-subscription restriction, permissions issue, resource-provider problem, region restriction, or something else.
Please open the failed deployment notification and select the option to view the deployment details/operation details, then expand the failed Microsoft.Network operation. Alternatively, go to:
Resource group → Deployments → failed deployment → Deployment details
and copy the Error code, Error message, and inner error, removing any subscription IDs or other sensitive information before posting it here.
Also check the subscription itself under Subscriptions → your subscription → Overview and confirm that its status is Enabled. Windows 365's ANC troubleshooting guidance specifically says the Azure subscription must be valid, enabled, and healthy.
Once you create the VNet, you must meet additional requirements to create the ANC. The first ANC requires the appropriate Windows 365/Intune administrative role and sufficient Azure subscription permissions; during setup, Windows 365 receives Reader access to the subscription, Windows 365 Network Interface Contributor on the resource group, and Windows 365 Network User on the VNet.
One other point: if this is only a Windows 365 proof of concept and you don't specifically require your own Azure VNet, I recommend Microsoft Hosted Network for most deployments. It doesn't require your own Azure subscription/VNet. ANC is mainly intended for scenarios where you need customer-managed networking, Hybrid Entra Join, direct connectivity to on-premises resources, private DNS, VPN/ExpressRoute, fixed egress, etc.
So don't create an Azure Policy or change policy settings yet. Please post the actual inner validation error from the failed VNet deployment first; that should tell us exactly what's preventing the VNet from being created.
References:
Windows 365 network requirements
Azure Network Connection overview
Troubleshoot Azure Network Connections
Windows 365 network deployment options
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