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I just got this error when trying to add an Administration Console User to TFS 2010 installed on Windows 7 using a SQL Server database on a different server:

TF255440: The following account has a SQL Server login, but the login was denied access: TEST\cameron.fletcher. The server selected to host the databases for Team Foundation Server is: SQL. The SQL Server login associated with the user account must be granted access to the SQL Server instance on that server.

It turns out that although I have a login specifically assigned to me on the SQL box because I am also a member of a SQL administrators group there appears to be some issue with the TFS logic when verifying the connection. The solution? I simply deleted the login and it worked for me.

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