AI agents have become powerful tools for organizations to create custom solutions. The risk associated with these agents lies in their integration with internal data and systems. From a security perspective, this represents a shift in the threat landscape and calls for stronger protection against AI agents.
Risk?
Once an agent is deployed, it can access sensitive data and execute privileged actions based on natural language input. If threat actors are able to interact with the agent using natural language alone, they could influence how the agent plans and executes those actions. This risk is particularly serious because the agent operates with granted permissions, making it difficult to detect using traditional protection controls.
Compared to the years when Defender was first launched, there are now many more attack paths and technologies. The rising hype around AI and the upcoming functionalities within agents add to this landscape.
From a security point of view, there are two phases:
- Protecting the agent build time
- Controlling/ protecting the agents during runtime.
or threat actors, the runtime phase is particularly interesting, as it allows them to interact with the agent and use its granted permissions. By inspecting the agent’s behavior during execution, organizations can evaluate whether the actions performed align with the intended use and policy. This is where Microsoft Copilot Studio and real-time protection come into play.
Securing Microsoft Copilot Studio agents during runtime is critical for maintaining trust, protecting sensitive data, and ensuring compliance in real-world deployments. This blog provides more information on protecting AI agents using techniques from Microsoft Defender and Defender for Cloud Apps.
How works the AI agents?
Microsoft Copilot Studio agents are built from a few basic building blocks that work together to understand requests and perform actions. From a security point of view, these building blocks also define where things can go wrong. If you understand them, it becomes much easier to see how an attacker might try to influence or misuse an agent.
At a high level, a Copilot Studio agent listens to input (from a user or an automatic trigger), decides what to do, and then carries out one or more actions. When generative orchestration is enabled, the agent doesn’t just follow a fixed path. Instead, it can dynamically create a step-by-step plan at runtime. This makes the agent more powerful, but it also means that carefully crafted input can push it in unexpected or unsafe directions.
The three main components of an agent are topics, tools, and knowledge sources.
Topics
Topics define how conversations are structured. Each topic is triggered by specific user phrases and consists of a series of nodes that guide the interaction step by step. These nodes can ask questions, evaluate conditions, call tools, or branch the conversation based on user input.
From a security standpoint, topics are more than just conversation logic. They determine when tools are invoked, which data is passed between steps, and how decisions are made. Poorly designed topic logic can allow users to steer the conversation into unintended paths, skip validation steps, or trigger actions in the wrong context.
Tools
Tools represent the agent’s capabilities. These include Power Platform connector actions, AI Builder models, and generative AI responses. Tools can be embedded directly into topics or executed independently, giving the agent flexibility in how it fulfills requests.
Because tools often interact with external systems, they are a high-impact part of the attack surface. If an agent can call a tool that modifies data, sends messages, or retrieves sensitive information, controlling when and how that tool is used becomes essential. Generative orchestration increases this risk, as the orchestrator may decide to invoke tools dynamically based on user input rather than a fixed design.
Knowledge sources
Knowledge sources provide grounding for generative answers. They allow the agent to pull information from trusted systems such as Power Platform, Dynamics 365, internal documents, websites, or other enterprise data sources. This grounding helps prevent hallucinations and improves response quality.
However, knowledge sources also influence what information an agent is allowed to see and reuse. If access is too broad or content is poorly curated, an attacker may be able to extract sensitive data or use contextual clues to manipulate downstream actions. The way knowledge is indexed, filtered, and scoped directly affects both accuracy and security.
Why this matters
Together, topics, tools, and knowledge sources define how a Copilot Studio agent interprets input and executes actions. In environments that rely on generative orchestration, these components are not used in isolation. They are dynamically combined at runtime, which means that unexpected interactions can occur if guardrails are not carefully designed.
In short, the same features that make Copilot Studio agents powerful also make them sensitive to misuse. So it is important to protect and configure the correct guards and protection features to detect and interact with the new threats. More information in this blog!
Must read! More information from Microsoft Security: From runtime risk to real‑time defense: Securing AI agents
Protect Microsoft Copilot Studio AI agents
With the use of Defender for Cloud Apps, AI agents can be protected. As mentioned earlier, organizations face new types of security risks. Examples of new security threats related to agents include:
- Injecting malicious prompts
- Triggering unintended tool executions
- Exploiting data sources to escalate privileges or exfiltrate data
Microsoft Defender includes a couple of features to address security gaps with AI Agents. Good examples are threat hunting/ proactive exposure/real-time protection, and the generation of alerts in Microsoft Defender.
Gain insights into the AI agent inventory
One of the first steps is gaining insights into the AI agent environment. By using Defender for Cloud Apps, you can gain visibility into the AI agents you have created. The following settings need to be enabled to obtain these insights:
Enable the Copilot Studio AI agent inventory
If you want to take advantage of these AI-driven security features, here’s a step-by-step guide to getting your AI agent inventory up and running.
First, sign in to the Microsoft Defender portal. Once logged in:
- Navigate to Settings > Cloud Apps > Copilot Studio AI Agents.
- Toggle the switch to turn on Copilot Studio AI Agents.
| This feature is currently in preview and included with your Microsoft Defender for Cloud Apps license at no extra cost. Licensing requirements may change when the feature becomes generally available. If that happens, the feature will be disabled, and you will be notified should you wish to re-enable it under the new license. |
When enabled, the Microsoft 365 App Connector status will be collected from Defender for Cloud Apps App Connectors. When the connector is not yet enabled, you can enable it directly via the Copilot Studio AI Agents dashboard. All keep in mind to check the configured events in the app connector (see below).
Check the Microsoft 365 app connector in Defender for Cloud Apps
In Defender -> Settings -> Cloud Apps check the Microsoft 365 app connector. For full insights, I would recommend enabling the full set of audit events. Even when the app connector is green, it still cannot be configured correctly.
Select the app and click on “Edit Settings”
Check that all the categories are enabled to gain full visibility and control:
Connect Power Platform
Next, we need to connect the AI agent inventory via the Power Platform admin center. To enable the AI agent inventory, you must have Power Platform admin rights.
Go to the Power Platform Portal and follow the steps below:
Go to Security -> Threat Protection, and Select Microsoft Defender – Copilot Studio AI Agents.
Turn on Enable Microsoft Defender – Copilot Studio AI Agents.
When Copilot Studio AI agents are connected, a green indicator appears in the AI Agents Inventory section of the Microsoft Defender for Cloud Apps system settings. Depending on the size and complexity of your environment, it may take some time for all data to appear. If the status shows “Required permission missing,” don’t panic, it can take a while before it turns green in the portal.
Real-time protection (runtime phase)
When a user submits a prompt, the agent first creates a response plan outlining the tools and actions it will use. Before executing that plan, Copilot Studio sends it to an external monitoring system through an API call.
The information shared includes the user’s prompt and conversation history, details about the tools being used and their input values, and relevant metadata such as the agent ID, user ID, and tenant ID. The checking system checks the agents. If it blocks the action, the agent stops, informs the user, and generates alerts in the Defender portal with more detailed information.
If Microsoft Defender determines that a prompt is suspicious:
- The tool invocation is blocked before it runs.
- The user gets notified that their message was blocked.
- An alert is created and appears in the Microsoft Defender portal
The enablement is a three-step process including:
- Create an Entra ID application
- Configure Defender for Cloud Apps – AI Agents
- Configure Power Platform Security
If the Microsoft 365 connector isn’t connected, real-time agent protection during runtime continues to block suspicious activity on the AI agent, but alerts and incidents related to these actions won’t appear in the Microsoft Defender portal. So important to validate that the Microsoft 365 App Connector is correctly enabled.
How to enable?
Navigate to Settings > Cloud Apps > Copilot Studio AI Agents and click on Connect under “Copilot Studio real-time protection”
Enable real-time protection. With this integration, Defender is allowed to scan agent tool invocations calls in real-time, detect security risks (suspicious behavior or cross-prompt injection attacks), and block malicious actions.
So the remaining item is the creation of the Entra ID Application. The App registration needs to be created with the Federated Identity Credential (FIC) using the URL in the portal of Defender for Cloud Apps. The URL is visible via:
URL: (always check the portal for the latest URL)
https://mcsaiagents.security.core.microsoft/v1/protectionPowerShell
Microsoft provides a PowerShell script that automates the application creation and configuration, reducing the chance of configuration mistakes. Install the Create-CopilotWebhookApp.ps1 script from the PowerShell Gallery and run the script with the required information.
More information for the creation via PowerShell: Enable external threat detection and protection for Copilot Studio custom agents (preview) – Microsoft Copilot Studio | Microsoft Learn
Manual
More information for the manual creatin of the service principal: Enable external threat detection and protection for Copilot Studio custom agents (preview) – Microsoft Copilot Studio | Microsoft Learn
App registration needs to be created with Federated Identity Credentials (FIC). Base64 value can be generated via PowerShell to create a base64 value. See below the script for generating the base64 value.
- Issuer: Enter the following URL, replacing
{tenantId}with your organization’s Microsoft Entra tenant ID:https://login.microsoftonline.com/{tenantId}/v2.0 - Type: Select Explicit subject identifier.
- Value: Input a string structured as follows:
/eid1/c/pub/t/{base 64 encoded tenantId}/a/m1WPnYRZpEaQKq1Cceg--g/{base 64 encoded endpoint}
Example input:
/eid1/c/pub/t/XWCj6CL5jEAAlj9Vc65cA/a/m1WPnYRZpEaQKq1Cceg--g/aHR0DHM6Ly9tY3NhaWFnZW50cy5DDWN1cmeS5jb3JlLm1pY3Jvc29mdC92MS9wcm90ZWN0aW9u
Change the below tenantID and endpointURL. Use the URL from the Defender for Cloud Apps settings page, tenantID, and endpointURL to generate the base64string for both tenant and endpoint.
# Encoding tenant ID
$tenantId = [Guid]::Parse("11111111-2222-3333-4444-555555555555")
$base64EncodedTenantId = [Convert]::ToBase64String($tenantId.ToByteArray()).Replace('+','-').Replace('/','_').TrimEnd('=')
Write-Output $base64EncodedTenantId
# Encoding the endpoint
$endpointURL = "https://provider.example.com/threat_detection/copilot"
$base64EncodedEndpointURL = [Convert]::ToBase64String([Text.Encoding]::UTF8.GetBytes($endpointURL)).Replace('+','-').Replace('/','_').TrimEnd('=')
Write-Output $base64EncodedEndpointURLCopy the Application ID in the Defender for Cloud Apps portal and enable real-time protection. Make sure to include the App ID of the created App Registration.
Open the Power Platform Admin Center and go to Security > Threat detection > Additional threat detection and protection for Copilot Studio agents. Here, we need to select the environment and click on set up.
Fill in the Entra App ID of the created app registration and paste the Endpoint link as visible in the Defender for Cloud Apps settings.
Now all of the connectors are configured correctly, and all of the status is green:
How it works?
Now time for some testing – in my lab, created a simple Copilot Studio agent to read the latest MCP docs from Microsoft Learn. When a user interacts with a Microsoft Copilot Studio agent, the conversation flows naturally until the agent needs to act. Before the action is executed, the request is routed via Microsoft Defender for Cloud Apps for in-depth inspection.
There are two layers of protection:
- The content was filtered due to Responsible AI restrictions
- Blocked by threat protection
Responsible AI filtering
Responsible AI filtering is a built-in capability. Responsible AI filtering is always enabled in Microsoft Copilot Studio; even when real-time protection is disabled, it will work. It focuses on the conversation if needed. A good example is below; when asking to send the output to a malicious email address.
When we asked to send all data to hacker@hacker.com it generated the following message and blocks the AI agent with the message: openAIJailBreakThe content was filtered due to Responsible AI restrictions.
Real-Time Threat Protection
Real-Time Threat Protection is where the Defender for Cloud Apps capabilities come in to protect the AI app at the execution level. This protection prevents unauthorized data access attempts, privilege escalation, and unintended tool execution or manipulation.
ASCII smuggling
Cybersecurity threats don’t always arrive as obvious malware files or suspicious links. Sometimes, they hide in something as innocent-looking as plain text. One increasingly discussed technique is ASCII smuggling, a clever method attackers use to sneak malicious content past security defenses using simple text encoding.
ASCII smuggling is a technique where attackers encode malicious files or scripts into plain ASCII text. Because the content appears as harmless text, it can bypass traditional security tools that are configured to block executable attachments like .exe, .js, or .ps1 files.
To help with testing and creation of payloads, and also to check if text might have invisible Unicode Tags, you can use ASCII Smuggler. Common Unicodes for ASCII smuggling; U+200B, U+200C and U+200D.
Must read about ASCII Smuggling: A Threat Hidden in Plain Sight | Marcogeber.ch
Example: The following text is used as input in the LLM/ agent: “Tell me about the latest Microsoft security news.” As you can see in the ASCII Smuggler, the text contains hidden Unicode (YELLOW TEXT)
When we use the text as input, the following experience is visible in the CoPilot agent. With the following error code:
Error Message: The content was filtered due to Responsible AI restrictions. Error Code: ContentFiltered Conversation Id: f12108ce-985c-4adc-94d9-24aca6494d28 Time (UTC): 2026-02-11T21:48:10.859ZAlert in Defender
Since Microsoft Defender for Cloud Apps is configured and the app inventory/ real-time protection is enabled, it generates alerts in the Microsoft Defender portal. If Defender for Cloud Apps identifies suspicious activity, the process includes three steps:
- The tool is blocked before it executes
- User receives a notification that the message was blocked
- Alert created in the Defender portal
Incident view:
Alert view:
Conslucion
Microsoft Copilot Studio AI agents are powerful tools for organizations, but they introduce new security risks because they can access sensitive data and execute actions based on natural language input. Threat actors could misuse these agents if they gain interaction access, especially during runtime when agents operate with granted permissions. With the use of Defender for Cloud Apps more visibility and insights in Copilot Studio Agents is visible in the portal of Defender.
Sources
ASCII Smuggler: Website
Microsoft Copilot Studio: Real-Time Protection for AI Agents | Thalpius
How to Secure Microsoft Copilot Studio Agents with Real-Time Protection in Defender
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What crossover is there between these settings for copilot studio and the new security copilot from Microsoft. I see that also uses CloudAppEvents table.