Cannot remove the domain ‘‘ because it is referenced by the proxy address template ‘smtp:@‘

As issue that I’ve seen on Exchange 2007 after a migration from Exchange 2003, if you try to remove an accepted domain, but keep getting this error:

Cannot remove the domain ‘<domain name>’ because it is referenced by the proxy address template ‘smtp:@<domain name>’

First off go to the Exchange Management Console – Microsoft Exchange – Organisation configuration – Hub Transport – E-mail Address Policies.

Make sure that the domain is removed from any policies that you have set up, if the problem still persists go to a domain controller that has Windows Server Support Tools installed.

Run: adsiedit.msc from Start – Run

now browse to the following:

• Configuration
• CN=Configuration,DC=<Domain Name>,DC=<Root>
• CN=Services
• CN=Microsoft Exchange
• CN=<Exchange Organization>
• CN=Recipient Policies

Now right click CN=Default Policy and select properties.
Scroll down to the attribute named disabledGatewayProxy, select it and click edit. Remove the offending domain and click ok.
Give it a while for active directory to replicate across all domain controllers.

Go to the Exchange Management Console – Microsoft Exchange – Organisation configuration – Hub Transport – Accepted Domains

You should now be able to remove the offending domain successfully.