Microsoft has released a workaround for an Outlook bug that prevents users from signing in. The Outlook team is looking for a final fix for the bug. The error manifests itself in two ways. Microsoft has detailed how the problem occurred below:

PROBLEM

You will be prompted to sign in to Outlook for your Outlook.com account and receive the following error dialog.

Or your Outlook.com account is already added to your Outlook profile, but the status bar says “Password required”. You receive the following error dialog when you try to sign in with your Outlook.com account.

“You cannot sign in here with a personal account. Use a work or school account instead.”

Microsoft recommends turning support diagnostics off as a workaround. This is because the error is believed to be related to the way Outlook authenticates itself for diagnostics in some cases.

You can disable this feature using the tip here: Disable support diagnostics in Outlook. In summary, you can go to the registry and set the “DisableSupportDiagnostics” DWORD to 1 which indicates True.

[HKEY_CURRENT_USER\Software\Microsoft\Office\16.0\Outlook\Options\General] 
"DisableSupportDiagnostics"=dword:00000001

More information can be found in the official support article on the Microsoft website.