Are you using 128.2.2?

128.2.2 was withdrawn on Thursday because of google/gmail/oauth issues. If you are seeing such issues you can update to 128.2.3 using Help > About. If you do not see 128.2.3 you can download and install 128.2.1 https://ftp.mozilla.org/pub/thunderbird/releases/128.2.1esr/linux-x86_64/

No, I'm using 128.2.1esr-2 but I updated to 128.2.3esr-2. It asked for my oAuth2 credentials after the update but it did not resolve the issue.

re :Changing Auth method to Normal Password and then using app-specific password.

At this moment do you have both incoming and outgoing (smtp) server settings Authentication Method: set as 'Oauth2' ? If yes, then make sure you have swiched off the 2 step verification, otherwise data says expect app specific but settings say expect oauth.

Settings > Privacy & Security WEb Content Select 'Accept cookies from sites'

Make sure any VPN is switched off.

I'm presuming you have: switched off 2 step verification. There are no VPN You have switched off anything that can use localhost such as Apache Xampp Web Content accepts cookies and always allow third party cookies. You have Authentication Method: Oauth2 for both incoming server and smtp server. Correct Server Settings.

• Settings > Privacy & Security
• Passwords section
• Click on 'Saved Passwords'

• completely remove any saved password line for that outlook account.
• Whether it's imap:// or smtp:// or oauth://

Then restart Thunderbird.

Enter normal password (same one you use to access webmail) at prompt and then you get a second window where you click on 'Accept' to allow TB access to server.

Do you get to that second window? Is there an 'oauth://outlook account...' line in the saved passwords ?

All of your presumptions are correct, except for one - I don't know what you mean by switching off 2 step verification. Is that a setting in Thunderbird or are you talking bout the 2factor on the Microsoft account?

In saved passwords, there are 3 oauth:// 2 for fastmail, which I left alone, and 1 for login.microsoft.com. I removed it and restarted Thunderbird. Upon the restart, a new authentication window popped up. I entered my credentials. It then prompted for my 2 factor. I entered that. The window disappears, I DO NOT get a second window that has "Accept to allow TB". I've seen that window before on other devices, but it is not prompting now.

I sent a test email from another email client, I received it fine in Thunderbird. I attempted to send an email from Thunderbird, same error.

I went back into Saved Passwords and a new oauth://login.microsoft.com for today was created.

This is the url in saved passwords:

oauth://login.microsoftonline.com (https://outlook.office.com/IMAP.AccessAsUser.All https://outlook.office.com/POP.AccessAsUser.All https://outlook.office.com/SMTP.Send offline_access)