I was struggling with this error message today – everything I had found on the Internet suggested it related to security. Well, it does, of sorts, and a careful look at the configuration of your SMTP server without mis-interpreting a dialog box.
If you open the properties for your SMTP server under IIS admin, select the Access Tab, and at the bottom, click “Relay”, you will see a check-box at the bottom, which is by default selected, saying “Allow all computers which successfully authenticate to relay, regardless of the list above”. In my head-scratching to work out the cause of the error, I had mis-read the message as “Allow all users which succ….”. The answer therefore was simple, above that check-box on the relay restrictions tab, there is a options dialog which by default Only the list may relay. Simple as adding your server to the list, or selecting All except the list below. The first one is obviously more secure.