Do you have 2 step verification enabled?
If yes, here's the link on how to generate an app password for Outlook accounts.
To set up an Office 365(Outlook)/Exchange account, make sure that email account settings are correct (server/hostname, port, SSL, and password). You can find this information in your email client app settings or you can ask your IT specialist.
For example, in Outlook -> Sync mail tab as shown on the screenshot below:
If you’re connecting to an Exchange mailbox and not using Office 365 email (or if you aren't sure if you're using Office 365 email), do the following to look up your settings:
Sign in to your account using Outlook Web App. To get help signing in, see Sign in to Outlook Web App
In Outlook Web App, select Settings > Mail > POP and IMAP on the toolbar
The POP3, IMAP4, and SMTP server name and other settings you may need to enter are listed on the POP and IMAP settings page
Here are the generic settings for Outlook:
Please note: for all Outlook accounts, you must make sure that you are only logged into the web version of the account. Any other logins to the desktop version or third party app will ruin the connection.
Enable/disable SMTP AUTH for specific mailboxes
Check out Microsoft 365 admin center to make sure, SMTP AUTH on specific mailboxes is enabled:
Open the Microsoft 365 admin center and go to Users > Active users.
Select the user, and in the flyout that appears, click Mail.
In the Email apps section, click Manage email apps.
Verify the Authenticated SMTP setting: unchecked = disabled, checked = enabled.
How to check and enable IMAP
You may receive a connection error if you configured your Outlook.com account as IMAP in multiple email clients. Try the following workaround:
Go to account.live.com/activity and sign in using the email address and password of the affected account
Under Recent activity, find the Session Type event that matches the most recent time you received the connection error and click to expand it
Select This was me to let the system know that you authorize the IMAP connection
Attempt to connect to the account via your IMAP client. For more information on how to use the Recent activity page, go to What is the recent activity page?
If you use Outlook.com to access an account that uses a domain other than @live.com, @hotmail.com, or @outlook.com, you might not be able to sync your accounts using IMAP.
To check, if IMAP is enabled:
Open Microsoft Admin center (You may need Admin access)
Go to Users -> Active Users
Select your email account -> Mail -> Manage email apps
Сheck if IMAP is enabled:
Do you use a desktop Outlook client?
Please log in to a web browser version, using the email and password you're entering to Reply and see if that works there.
Make sure that the username matches your email account address. If it doesn't, specify the username in Reply too.