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I have a SharePoint 2010 portal (Claims based + NTLM + SSL). If I open office document within domain it prompts for login window and even if I enter correct user name and password and it doesn't authenticate and continously pops up login prompt. If I cancel the Login screen then it opens the documents and i'm able to save the document but many time the office client freezes.

I used fiddler to see the request trace and I noticed 401 error response continously.

I have added the site to local intranet zone & Trusted sites in IE and set custom level to automatic log-on.

This is driving me nuts. :(

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After struggling for a week finally we opened a support ticket with Microsoft and after going through various farm & server and web application configurations we identified that the following tag in web.config used a "domain" and "enableCrossAppRedirects" attribute which prompted office documents to prompt for authentication window and still wouldn't authenticate even if enter correct user name and passwords many times. After removing these attributes authentication prompts went away and everything started to work as usual.

forms loginUrl="/_login/default.aspx" domain="school.edu.au" enableCrossAppRedirects="true"

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