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The forest functional levels are the various states of a forest, which enable forest-wide Active Directory features within a network environment. Windows supports three types of functional levels:
1.Windows 2000: This is the default functional level. When a first domain controller is installed or upgraded to Windows 2003, the forest is configured to run in the Windows 2000 functional level. In this mode, domain controllers running the following operating systems are supported:
◦Windows NT Server 4.0

◦Windows 2000 Server

◦Windows Server 2003
At this level, only the global catalog replication improvement feature of the Windows 2003 operating system is supported and that too when both replication partners are running Windows Server 2003.

2.Windows Server 2003 Interim: This functional level allows a Windows Server 2003 domain controller to interact with domain controllers in the domain running Windows NT 4.0 or Windows Server 2003. This functional level is used to upgrade the first Windows NT domain to a new forest.

Note: Windows Server 2003 interim functional level does not support domain controllers running Windows 2000.

3.Window Server 2003: This functional level of forest allows a Windows Server 2003 domain controller to interact only with the domain controllers running Windows 2003 in the domain. This functional level supports the full features of the Windows 2003 forest. The following two conditions must be met before raising the forest level to Windows Server 2003:
◦All domain controllers in the forest must run Windows Server 2003.

◦All domain functional levels in the forest must be raised to Windows Server 2003.
Note: Once the forest functional level has been raised to Windows Server 2003, no domain controller running an operating system other than Windows Server 2003 should be included in the forest.