fix(azure): resolve Azure AD tokens for v1 API version client

When api_version is "v1", "latest", or "preview", litellm creates a
standard OpenAI client instead of AzureOpenAI. The OpenAI client does
not accept azure_ad_token_provider, so Azure AD authentication was
silently dropped, causing auth failures.

Now resolves azure_ad_token_provider (by calling it) or azure_ad_token
to api_key before constructing the OpenAI client.

Fixes https://github.com/BerriAI/litellm/issues/27945

🤖 Generated with [Claude Code](https://claude.com/claude-code)

Co-Authored-By: Claude <noreply@anthropic.com>

litellm/llms/azure/common_utils.py

@@ -474,8 +474,22 @@ class BaseAzureLLM(BaseOpenAILLM):
             if self._is_azure_v1_api_version(api_version):
                 # Extract only params that OpenAI client accepts
                 # Always use /openai/v1/ regardless of whether user passed "v1", "latest", or "preview"
+                v1_api_key = azure_client_params.get("api_key")
+
+                # When using Azure AD auth, resolve the token for the
+                # standard OpenAI client which does not accept
+                # azure_ad_token_provider directly.
+                if not v1_api_key:
+                    azure_ad_token_provider = azure_client_params.get(
+                        "azure_ad_token_provider"
+                    )
+                    if azure_ad_token_provider is not None:
+                        v1_api_key = azure_ad_token_provider()
+                    elif azure_client_params.get("azure_ad_token"):
+                        v1_api_key = azure_client_params["azure_ad_token"]
+
                 v1_params = {
-                    "api_key": azure_client_params.get("api_key"),
+                    "api_key": v1_api_key,
                     "base_url": f"{api_base}/openai/v1/",
                 }
                 if "timeout" in azure_client_params:

tests/test_litellm/llms/azure/test_azure_common_utils.py

@@ -1646,6 +1646,78 @@ def test_azure_v1_api_uses_openai_client(api_version):
         ), f"base_url should contain /openai/v1/, got {async_client.base_url}"
 
 
+@pytest.mark.parametrize("api_version", ["v1", "latest", "preview"])
+def test_azure_v1_api_with_azure_ad_token_provider(api_version):
+    """
+    Test that Azure v1 API versions resolve azure_ad_token_provider to api_key.
+
+    The standard OpenAI client used for v1 API versions does not accept
+    azure_ad_token_provider. When no api_key is provided and an
+    azure_ad_token_provider is set, the provider should be called and the
+    resulting token used as api_key for the OpenAI client.
+
+    See: https://github.com/BerriAI/litellm/issues/27945
+    """
+    from openai import OpenAI
+
+    base_llm = BaseAzureLLM()
+    api_base = "https://test.openai.azure.com"
+    token_value = "mock-azure-ad-token-from-provider"
+
+    with patch.object(base_llm, "initialize_azure_sdk_client") as mock_init:
+        mock_init.return_value = {
+            "api_key": None,
+            "azure_endpoint": api_base,
+            "api_version": api_version,
+            "azure_ad_token": None,
+            "azure_ad_token_provider": lambda: token_value,
+        }
+
+        client = base_llm.get_azure_openai_client(
+            api_key=None,
+            api_base=api_base,
+            api_version=api_version,
+            _is_async=False,
+        )
+
+        assert isinstance(client, OpenAI)
+        assert client.api_key == token_value
+
+
+@pytest.mark.parametrize("api_version", ["v1", "latest", "preview"])
+def test_azure_v1_api_with_azure_ad_token(api_version):
+    """
+    Test that Azure v1 API versions use azure_ad_token as api_key when no
+    api_key or token_provider is set.
+
+    See: https://github.com/BerriAI/litellm/issues/27945
+    """
+    from openai import OpenAI
+
+    base_llm = BaseAzureLLM()
+    api_base = "https://test.openai.azure.com"
+    token_value = "static-azure-ad-token"
+
+    with patch.object(base_llm, "initialize_azure_sdk_client") as mock_init:
+        mock_init.return_value = {
+            "api_key": None,
+            "azure_endpoint": api_base,
+            "api_version": api_version,
+            "azure_ad_token": token_value,
+            "azure_ad_token_provider": None,
+        }
+
+        client = base_llm.get_azure_openai_client(
+            api_key=None,
+            api_base=api_base,
+            api_version=api_version,
+            _is_async=False,
+        )
+
+        assert isinstance(client, OpenAI)
+        assert client.api_key == token_value
+
+
 def test_azure_traditional_api_uses_azure_openai_client():
     """
     Test that traditional Azure API versions still use AzureOpenAI client.