When dealing with Windows services running under the Local System account, traditional proxy configuration methods fail because:

Registry settings under HKCU only affect interactive user sessions
The LOCAL SYSTEM account (SID: S-1-5-18) has no user profile in the conventional sense
Group Policy settings may override manual configurations



The most reliable method is modifying the machine-wide Windows registry settings:

Windows Registry Editor Version 5.00

[HKEY_LOCAL_MACHINE\SOFTWARE\Policies\Microsoft\Windows\CurrentVersion\Internet Settings]
"ProxyEnable"=dword:00000001
"ProxyServer"="192.168.1.100:8080"
"ProxyOverride"="<local>;*.contoso.com"

For deployment across multiple machines, use this PowerShell snippet:

# Configure system-wide proxy settings
$regPath = "HKLM:\SOFTWARE\Policies\Microsoft\Windows\CurrentVersion\Internet Settings"
$proxyServer = "corporate-proxy:3128"

# Enable proxy
Set-ItemProperty -Path $regPath -Name "ProxyEnable" -Value 1 -Type DWord

# Set proxy server
Set-ItemProperty -Path $regPath -Name "ProxyServer" -Value $proxyServer -Type String 

# Configure bypass list
Set-ItemProperty -Path $regPath -Name "ProxyOverride" -Value "<local>;*.internal" -Type String

# Force refresh (requires WinHTTP service restart)
Restart-Service -Name WinHttpAutoProxySvc -Force

For applications using WinHTTP directly (like some services):

:: Command prompt as Administrator
netsh winhttp set proxy corporate-proxy:8080 "<local>;*.example.com"

Confirm your settings took effect with these checks:

Registry: reg query "HKLM\SOFTWARE\Policies\Microsoft\Windows\CurrentVersion\Internet Settings"
WinHTTP: netsh winhttp show proxy
Test connection: curl.exe -v http://example.com --proxy corporate-proxy:8080


Always restart dependent services after configuration changes
Check Event Viewer for Windows Filtering Platform logs if connections fail
Consider using ProxySettingsPerUser=0 in registry for machine-wide enforcement
For modern Windows services, test with both WinINET and WinHTTP configurations



When working with Windows services running under the LOCAL SYSTEM account, standard proxy settings configured through Control Panel or HKEY_CURRENT_USER registry don't apply. This creates connectivity issues for services that need internet access through corporate proxies.
The Windows registry stores proxy settings at multiple levels:
1. Current User: HKEY_CURRENT_USER\Software\Microsoft\Windows\CurrentVersion\Internet Settings
2. Default User: HKEY_USERS\.DEFAULT\Software\Microsoft\Windows\CurrentVersion\Internet Settings
3. System Account: HKEY_USERS\S-1-5-18\Software\Microsoft\Windows\CurrentVersion\Internet Settings
For system-wide proxy settings affecting all users including LOCAL SYSTEM, you need to configure WinHTTP proxy settings:
netsh winhttp set proxy proxy-server="http=proxy.example.com:8080;https=proxy.example.com:8080" bypass-list="*.contoso.com;localhost"

For services that need to set proxy programmatically:
using Microsoft.Win32;

public static void SetSystemProxy(string proxyAddress, bool enableProxy)
{
    // Set for WinHTTP (system-wide)
    System.Diagnostics.Process.Start("netsh", 
        $"winhttp set proxy proxy-server=\"{proxyAddress}\" bypass-list=\"localhost\"");

    // Set for current user (optional)
    using (RegistryKey key = Registry.CurrentUser.OpenSubKey(
        @"Software\Microsoft\Windows\CurrentVersion\Internet Settings", true))
    {
        key.SetValue("ProxyEnable", enableProxy ? 1 : 0);
        key.SetValue("ProxyServer", proxyAddress);
    }
}

For enterprise environments, the most reliable method is Group Policy:
1. Open gpedit.msc
2. Navigate to: Computer Configuration → Administrative Templates → Windows Components → Internet Explorer
3. Configure "Make proxy settings per-machine (rather than per-user)"
4. Set "Proxy settings" with your required configuration

Check effective proxy settings with PowerShell:
# Check WinHTTP settings
netsh winhttp show proxy

# Check Internet Explorer settings
(Get-ItemProperty -Path "HKCU:\Software\Microsoft\Windows\CurrentVersion\Internet Settings").ProxyServer


Ensure the service account has network access permissions
Verify proxy authentication requirements
Check bypass-list includes necessary internal domains
Test connectivity with Test-NetConnection in PowerShell

For applications using WinINET (like Internet Explorer), you can force system-wide settings:
const int INTERNET_OPTION_SETTINGS_CHANGED = 39;
const int INTERNET_OPTION_REFRESH = 37;

[DllImport("wininet.dll", SetLastError = true)]
static extern bool InternetSetOption(IntPtr hInternet, int dwOption, IntPtr lpBuffer, int dwBufferLength);

public static void RefreshSystemProxySettings()
{
    InternetSetOption(IntPtr.Zero, INTERNET_OPTION_SETTINGS_CHANGED, IntPtr.Zero, 0);
    InternetSetOption(IntPtr.Zero, INTERNET_OPTION_REFRESH, IntPtr.Zero, 0);
}