Forest and domain functional levels determine their capabilities and the operating system you run on DCs in the domain or forest.

When you deploy an active directory domain service, always set the highest value of forest and domain functional level in your environment to get all available features.  Suppose when you have set forest and domain functional level to Windows Server 2016, you cannot add DC's running Windows Server 2012 or 2008.

During ADDS deployment, if you have set forest functional level to Windows Server 2012 R2 you cannot set the domain functional level lower than Windows Server 2012 R2 like Windows Server 2008 or 2003.

What is Meant by Forest and Domain Functional Levels
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Karim Buzdar

About the Author: Karim Buzdar holds a degree in telecommunication engineering and holds several sysadmin certifications. As an IT engineer and technical author, he writes for various web sites. He blogs at LinuxWays.

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