MCP Tool Issue with API Key Authorization

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Posted on by AA-29041637-0

Hi,

I’m trying to add a Vendor MCP server to Copilot Studio.

What works:

MCP server can be added with an Agent -> Tools

API key connection is created successfully

Header name is Authorization, value is Bearer <key>

What doesn’t:

After saving the connection, Copilot Studio fails to load tools

I get “Connector request failed / couldn’t retrieve resource”

Error shown is a JSON‑RPC -32603 internal error

Result: no tools available

See error attached

This is a vendor‑managed MCP server. We don’t host or configure it — we just enable it and use the API key they provide.

It looks like Copilot Studio tries to read the MCP schema before authentication, but this MCP server requires auth for schema access. The connection itself works, but tool discovery fails right after.

Categories:

Model context protocol

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Nivedipa-MSFT Microsoft Employee on at

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Hello AA-29041637-0,
Encountering a -32603 error on tools/list right after a successful connection typically points to one of three causes:

Copilot Studio may not be sending the Authorization header during the discovery call. While the header is included on invocation, it might be missing on initialize/tools/list, especially when using SSE. Consider using the vendor’s streamable HTTP endpoint instead of SSE, or try /mcp instead of /sse.

The server may require authentication on the SSE GET and could return a 500 error rather than a 401. This would need to be addressed by the vendor.

The server might require OAuth 2.1, and the API key option is only valid for CLI clients. In this case, update your connector to use OAuth 2.0 with the appropriate auth/token URLs from the vendor rather than an API key.

Quick 5-minute check — run this from your machine using the same key:

curl -X POST https://<vendor>/mcp \
-H "Authorization: Bearer <key>" \
-H "Content-Type: application/json" \
-H "Accept: application/json, text/event-stream" \
-d '{"jsonrpc":"2.0","id":1,"method":"tools/list"}'

If it works, the issue is with Copilot Studio; try changing the transport and notify Microsoft and the vendor.

If you get a 401, the API key isn’t truly supported, so OAuth is required.

If you see the same -32603, it’s a server-side problem; share the request/response with the vendor.

Additional things to check: Make sure there’s no trailing whitespace in the key, the Bearer prefix is correct, no egress proxy is removing the Authorization header, and the Copilot Studio environment region matches the vendor endpoint.

Be aware of: API key storage (Key Vault), Recurrence time zone (defaults to UTC), and the premium HTTP connector. If you don’t have access to the premium connector, consider calling the API from an Azure Function and triggering the flow from there.

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Verified answer

Valantis 6,216 on at

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Hi @AA-29041637-0,

The answer above steps are spot on. One confirmed thing from Microsoft docs worth highlighting for your situation:

Copilot Studio no longer supports SSE transport for MCP after August 2025. If your vendor's MCP server is using an SSE endpoint (/sse), that is confirmed to not work in Copilot Studio regardless of authentication. The supported transport is streamable HTTP. Ask your vendor if they expose a streamable HTTP endpoint (typically /mcp) and use that URL instead.

If the vendor only has SSE and won't add streamable HTTP, this is a blocker that needs to go back to them Copilot Studio won't support it.
Ref: https://learn.microsoft.com/en-us/microsoft-copilot-studio/mcp-add-existing-server-to-agent

Best regards,

Valantis

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Nivedipa-MSFT Microsoft Employee on at

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Hello AA-29041637-0,
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