Introduction
With the rapid evolution of AI agents and copilots, the ability to securely connect large language models to your ERP data is becoming a game changer. Microsoft’s Model Context Protocol (MCP) opens up new possibilities for integrating tools like Copilot Studio and GitHub Copilot directly with Dynamics 365 Finance and Operations—allowing agents to reason over real business data, not just static prompts.
In this article, I walk through a practical, step-by-step guide to getting started with the MCP protocol in D365FO. From enabling the feature to connecting the ERP MCP server in Copilot Studio.
If you’re exploring AI agents, automation, or a sustainable AI strategy in D365FO, this is a great place to start.
Prerequisites
Ensure the following prerequisites are met before configuration:
- Your D365FO environment must be version 10.0.46 or later.
- The environment must be a Tier 2 sandbox or above.
- You need access to the Power Platform admin center and Microsoft Entra ID for configuration.
Enabling MCP protocol
Step 1: Enable the Feature in D365FO
- In your D365FO environment, go to Feature Management.
- Search for the feature (Preview) Dynamics 365 ERP Model Context Protocol server.
- Enable the feature.
- After this feature is enabled, you can set up the MCP in Copilot Studio or in Visual Studio Code using GitHub Copilot.
- Go to System administration > Setup > Allowed MCP clients. On the Allowed MCP clients form, you can enable existing clients or add new ones by entering the Client ID from the app registration.
Step 2: Configure Allowed MCP Clients
- Navigate to the Power Platform admin center.
- Select the specific environment name and go to Settings > Product > Features.
- Scroll to the Dataverse Model Context Protocol section and ensure Allow MCP clients to interact with Dataverse MCP server is turned on.
- Select Advanced Settings to specify which client to use by setting it to Yes under Is Enabled.
Step 3: Add the MCP Server as a Tool in Copilot Studio
- Go to Microsoft Copilot Studio and create a new agent or open an existing one.
- On the navigation menu, select the Tools tab.
- Select Add a tool.
- In the filter options, select Model Context Protocol.
- Search for and select the Dynamics 365 ERP MCP server.
- Follow the prompts to create a connection to the server. This will involve authentication by utilizing the permissions assigned to the connected user for the Fin & Ops Apps (Dynamics 365) connector. The MCP protocol needs a connector into D365FO, which is configured in the make.powerapp page and the connector shall be related to a user, which has access to D365FO and the correct licenses.
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- Select Add to agent.
- In Copilot Studio, go to the Overview page.
- Open the Test panel on the right side.
- Ask a query related to your D365FO data.
- When prompted in the chat, select Allow to enable the connection, and the agent should retrieve the information or perform the action using the MCP server.
Notes from Testing
- A prompt must be added to the Instructions tab for the agent to respond correctly to the test requests. Without this, the agent does not operate as expected.
- I initially tested the setup using the default GPT-4.1 model, but it did not return responses to my queries. After switching to Claude Sonnet 4.5 (Experimental), the agent behaved as expected and successfully returned results.
Setting up the new agent model required some additional time. I used the following guide as a reference during the process: https://dynamicspedia.com/2025/11/how-to-set-up-the-new-dynamics-365-erp-mcp-server/
Further Learning and Assistance
To learn more about the MCP protocol and agents in D365FO such as how to:
- Get started with the standard agents for Supplier Communication and Account Reconciliation
- Get started with the Sales order processing agent
- Combine the MCP protocol with incoming emails
- Combine the MCP protocol with Microsoft Teams
- Build your own custom agent
- Define a sustainable AI and agent strategy for optimization and automation