By default, Windows 7 and the Windows Server 2008 operating system do not support Internet Protocol security (IPsec) network address translation (NAT) Traversal (NAT-T) security associations to servers that are located behind a NAT device. Therefore, if the virtual private network (VPN) server is behind a NAT device, a Windows 7-based VPN client computer or a Windows Server 2008-based VPN client computer cannot make a Layer Two Tunneling Protocol (L2TP)/IPsec connection to the VPN server. This scenario includes VPN servers that are running Windows Server 2008, Windows Server 2008 R2 and Microsoft Windows Server 2003.

Update: Also applies to Windows 8.1 connecting to a L2TP VPN running on a Windows Server 2012 R2

Because of the way in which NAT devices translate network traffic, you may experience unexpected results when you put a server behind a NAT device and then use an IPsec NAT-T environment. Therefore, if you must have IPsec for communication, it is recommended that you use public IP addresses for all servers that you can connect to from the Internet. However, if you have to put a server behind a NAT device and then use an IPsec NAT-T environment, you can enable communication by changing a registry value on the VPN client computer and the VPN server.

To create and configure the
AssumeUDPEncapsulationContextOnSendRule

registry value, follow these steps:

Log on to the Windows 7 client computer as a user who is a member of the Administrators group.
Click Start, point to All Programs, click Accessories, click Run, type regedit, and then click OK. If the User Account Control dialog box is displayed on the screen and prompts you to elevate your administrator token, click Continue.
Locate and then click the following registry subkey:

HKEY_LOCAL_MACHINE\SYSTEM\CurrentControlSet\Services\PolicyAgent

On the Edit menu, point to New, and then click DWORD (32-bit) Value.
Type AssumeUDPEncapsulationContextOnSendRule, and then press ENTER.
Right-click AssumeUDPEncapsulationContextOnSendRule, and then click Modify.
In the Value Data box, type one of the following values:

• 0 (zero) configures Windows so that it cannot establish security associations with servers that are located behind NAT devices. This is the default value.
• 1 configures Windows so that it can establish security associations with servers that are located behind NAT devices.
• 2 configures Windows so that it can establish security associations when both the server and the Windows Vista-based or Windows Server 2008-based VPN client computer are behind NAT devices.

Click OK, and then exit Registry Editor. Restart the computer