The Most Misunderstood Identity in Azure
Managed Identity (MI) is often considered "secure by default."
It eliminates credential rotation.
It simplifies authentication to Azure services.
But here's the uncomfortable truth:
Misconfigured Managed Identities can become one of the most powerful lateral movement paths in Azure.
In multiple enterprise and healthcare environments, I've seen breaches where attackers didn't exploit passwords — they exploited overly privileged Managed Identities.
- How Managed Identity actually works
- Common architectural mistakes
- Real-world attack scenarios
- Privilege escalation paths
- Security best practices for Azure environments
How Managed Identity Actually Works
Managed Identity is an identity in Microsoft Entra ID (Azure AD) assigned to an Azure resource.
Applications retrieve tokens from:
http://169.254.169.254/metadata/identity/oauth2/tokenThis is the Instance Metadata Service (IMDS) endpoint.
Any process running inside the VM/App Service container can request a token if it can access IMDS.
That is where most security assumptions break.
Real-World Architectural Mistake #1
"It's Managed Identity, So Let's Give It Owner"
What Happens in Enterprises
To "avoid permission issues," teams often assign:
But it violates least privilege.
Attack Scenario: VM Compromise → Subscription Takeover
Step 1 — Initial Exploit
Step 2 — Token Retrieval
From inside the compromised host:
curl -H "Metadata:true" \ "http://169.254.169.254/metadata/identity/oauth2/token?api-version=2018-02-01&resource=https://management.azure.com/"They now have an Azure access token.
Full subscription compromise without stealing any passwords.
Real-World Architectural Mistake #2
Reusing User-Assigned Managed Identity Across Environments
Attack Scenario: Dev Compromise → Production Data Theft
Step 1 — Dev App Compromise
Attacker gains RCE in Dev.
Step 2 — Token Extraction
Step 3 — Key Vault Access
GET https://prod-kv.vault.azure.net/secrets/Production data compromise from Dev breach.
No firewall bypass required. No credential brute-force required.
Just misconfigured identity scope.
Real-World Architectural Mistake #3
Attackers can force the app to retrieve tokens for them.
SSRF to Managed Identity Attack
This is one of the most common cloud-native attack paths.
Application has SSRF vulnerability.
Attacker forces request to:
http://169.254.169.254/metadata/identity/oauth2/tokenApplication returns token response.
Attacker uses token against:
Impact depends on RBAC scope.
This has been exploited in real cloud breaches globally.
Architectural Mistake #4
No Network Segmentation with MI
"Identity is secure. Network doesn't matter."
Compromised workload with MI can:
Identity + network = attack amplification.
Managed Identity Security Best Practices
1. Follow Strict Least Privilege
2. Separate Identities Per Environment
Each environment must have:
3. Restrict IMDS Access (Advanced Control)
4. Monitor Managed Identity Usage
6. Combine Identity With Network Controls
Identity without segmentation is not Zero Trust.
Detection and Threat Modeling Considerations
When reviewing architecture, ask:
- What is the RBAC scope of this MI?
- Can this workload be compromised via RCE?
- If attacker gets shell, what Azure APIs can they call?
- Is this MI shared across environments?
- Is there subscription-level permission?
- Are logs monitored for abnormal usage?
If you cannot answer these clearly, you have risk.
Managed Identity removes secrets.
It does NOT remove privilege risk.
If compromised workload holds high-privilege identity, the identity becomes the attacker.
Managed Identity is powerful.
But power without least privilege creates invisible escalation paths.
Most cloud breaches are not caused by "hackers breaking crypto."
Secure your identities like they are production credentials.
Originally published at https://www.linkedin.com.