You have an on-premises server that runs Windows Server and contains the folders shown in...

A folder can be added as an Azure File Sync server endpoint as long as it is a normal, locally accessible NTFS folder path on a server that has already been registered with the Storage Sync Service -- there are, however, specific categories of folder that Azure File Sync explicitly disallows as server endpoints, such as the root of a volume that also holds the operating system, a folder that is already a server endpoint in another sync group, a folder containing another server endpoint ' s path (nested server endpoints on the same path chain are not supported), or a folder that resides on unsupported storage (such as certain network-attached or removable storage rather than fixed local storage). Folders that meet the ordinary criteria -- located on fixed, locally attached storage, not already in use as a conflicting endpoint elsewhere, and not the protected system-volume root -- are eligible regardless of their specific content or size. Based on the properties of the folders in this scenario, the folders that satisfy Azure File Sync ' s server endpoint requirements are Folder1 and Folder2, while the remaining folder does not meet one of the stated eligibility criteria and cannot be used as a server endpoint.