The Problem You’ve deployed an Azure Function using Docker to production, everything looks good, but when you try to call your function endpoint, you get a frustrating 401 Unauthorized error: 401 Unauthorized curl -X POST \ 
"https://my-prod-functions.azurewebsites.net/api/MyFunction?code=my-function-key" \
-H "Content-Type: application/json"
# Response: 401 Unauthorized curl -X POST \ 
"https://my-prod-functions.azurewebsites.net/api/MyFunction?code=my-function-key" \
-H "Content-Type: application/json"
# Response: 401 Unauthorized Meanwhile, your non-dockerized development environment works perfectly with the exact same code and keys. What’s going on? The Investigation Step 1: Rule Out the Obvious First, I checked all the usual suspects: Function keys were correct (copied from Portal → Functions → Function Keys)
No App Service Authentication enabled
No IP restrictions
CORS configured properly
Authorization level set to AuthorizationLevel.Function in my code. Function keys were correct (copied from Portal → Functions → Function Keys) No App Service Authentication enabled No IP restrictions CORS configured properly Authorization level set to AuthorizationLevel.Function in my code. AuthorizationLevel.Function Step 2: Check the Logs Application Insights revealed something interesting: Request successfully matched the route with name 'MyFunction' and template 'api/MyFunction' Executing StatusCodeResult, setting HTTP status code 401 Request successfully matched the route with name 'MyFunction' and template 'api/MyFunction' Executing StatusCodeResult, setting HTTP status code 401 The request was reaching the function and matching the route, but Azure was returning 401 before the code even executed. This meant the issue was at the Azure Functions runtime authentication layer, not in my code. before the code even executed Step 3: The Critical Discovery I inspected the environment variables via Kudu console (https://my-functions.scm.azurewebsites.net) and found: https://my-functions.scm.azurewebsites.net AzureWebJobsSecretStorageType = files 
WEBSITES_ENABLE_APP_SERVICE_STORAGE = false  # I THOUGHT THIS IS THE PROBLEM! AzureWebJobsSecretStorageType = files 
WEBSITES_ENABLE_APP_SERVICE_STORAGE = false  # I THOUGHT THIS IS THE PROBLEM! The Root Cause Here’s what was happening: How Azure Functions Stores Keys Azure Functions can store authentication keys in two ways: File-based storage (AzureWebJobsSecretStorageType = files)

Keys stored as JSON files in /home/data/Functions/secrets/
Requires persistent file system access
Default for non-containerized apps


Blob-based storage (AzureWebJobsSecretStorageType = blob)

Keys stored in Azure Blob Storage
No file system dependency
Recommended for Docker containers File-based storage (AzureWebJobsSecretStorageType = files)

Keys stored as JSON files in /home/data/Functions/secrets/
Requires persistent file system access
Default for non-containerized apps File-based storage AzureWebJobsSecretStorageType = files Keys stored as JSON files in /home/data/Functions/secrets/
Requires persistent file system access
Default for non-containerized apps Keys stored as JSON files in /home/data/Functions/secrets/ /home/data/Functions/secrets/ Requires persistent file system access Default for non-containerized apps Blob-based storage (AzureWebJobsSecretStorageType = blob)

Keys stored in Azure Blob Storage
No file system dependency
Recommended for Docker containers Blob-based storage AzureWebJobsSecretStorageType = blob Keys stored in Azure Blob Storage
No file system dependency
Recommended for Docker containers Keys stored in Azure Blob Storage No file system dependency Recommended for Docker containers The Docker Conflict When you set WEBSITES_ENABLE_APP_SERVICE_STORAGE = false (common for stateless Docker containers), Azure does not mount persistent storage to your container. WEBSITES_ENABLE_APP_SERVICE_STORAGE = false does not mount This means: Your function keys exist in Azure’s storage
But your container cannot access them
Authentication always fails with 401 Your function keys exist in Azure’s storage But your container cannot access them cannot access them Authentication always fails with 401 Let me verify this in the container: # SSH into container or via Kudu 

ls -la /home/data/
# Result: No such file or directory

ls -la /azure-functions-host/Secrets/
#Result: No such file or directory # SSH into container or via Kudu 

ls -la /home/data/
# Result: No such file or directory

ls -la /azure-functions-host/Secrets/
#Result: No such file or directory The secrets directory didn’t exist because storage wasn’t mounted! The Secondary Issue When I initially tried to fix this by setting WEBSITES_ENABLE_APP_SERVICE_STORAGE = true, authentication worked but I got 404 Not Found instead! WEBSITES_ENABLE_APP_SERVICE_STORAGE = true 404 Not Found Why? Because mounting Azure’s persistent storage at /home/site/wwwroot/ overwrote my Docker container’s application files. The mounted directory only had host.json but no compiled DLLs (in the docker container, not the host container it is very important to keep that in mind there are two containers here the host container and the app docker container) so Azure Functions runtime finds 0 functions to load so When a request comes in Authentication works (keys in blob) but Function not found so we get 404.In short, this option makes the host find the function key files (so authentication works) but loses the functions themselves. We cant use it and WEBSITES_ENABLE_APP_SERVICE_STORAGE needs to be false. /home/site/wwwroot/ overwrote host.json 0 functions 404 WEBSITES_ENABLE_APP_SERVICE_STORAGE The Solution The correct fix for Dockerized Azure Functions is to use blob-based secret storage: blob-based secret storage Step 1: Change Secret Storage Type In Azure Portal: Go to your Function App
Navigate to Configuration → Application Settings
Find or add: AzureWebJobsSecretStorageType
Set value to: blob
Ensure: WEBSITES_ENABLE_APP_SERVICE_STORAGE is false Go to your Function App Navigate to Configuration → Application Settings Configuration Application Settings Find or add: AzureWebJobsSecretStorageType AzureWebJobsSecretStorageType Set value to: blob blob Ensure: WEBSITES_ENABLE_APP_SERVICE_STORAGE is false WEBSITES_ENABLE_APP_SERVICE_STORAGE false Step 2: Save and Restart Click Save, then restart the function app. Azure will automatically: Save Create a azure-webjobs-secrets container in your storage account
Migrate existing keys to blob storage
Configure the runtime to read from blobs Create a azure-webjobs-secrets container in your storage account azure-webjobs-secrets Migrate existing keys to blob storage Configure the runtime to read from blobs Step 3: Get Your Keys Go to Portal → Function App → Functions → [Your Function] → Function Keys Function Keys Copy the key from the Portal (this is the decrypted version). Step 4: Test curl -X POST \ "https://my-prod-functions.azurewebsites.net/api/MyFunction?code=<KEY_FROM_PORTAL>" \ 
-H "Content-Type: application/json" \
-d '{"test": "data"}'

# Response: 200 OK curl -X POST \ "https://my-prod-functions.azurewebsites.net/api/MyFunction?code=<KEY_FROM_PORTAL>" \ 
-H "Content-Type: application/json" \
-d '{"test": "data"}'

# Response: 200 OK Understanding Key Encryption When you check blob storage, you’ll see keys stored like this: { "keys": [ 
  { 
    "name": "default", 
    "value": "CfDJ8AAAAAAA...encrypted-value...", 
    "encrypted": true 
  } 
 ] 
} { "keys": [ 
  { 
    "name": "default", 
    "value": "CfDJ8AAAAAAA...encrypted-value...", 
    "encrypted": true 
  } 
 ] 
} Important: You cannot use this encrypted value directly! Azure automatically: Important: Stores keys encrypted in blob storage (for security)
Decrypts them at runtime using machine keys
Validates incoming requests against decrypted values Stores keys encrypted in blob storage (for security) Decrypts them at runtime using machine keys Validates incoming requests against decrypted values Always get your keys from the Azure Portal UI, which shows the decrypted version. Azure Portal UI Complete Configuration Reference Dockerfile (Example) FROM mcr.microsoft.com/azure-functions/dotnet:4 AS base 
WORKDIR /home/site/wwwroot 
EXPOSE 80

FROM mcr.microsoft.com/dotnet/sdk:6.0 AS build 
WORKDIR /src 
COPY ["MyFunction/MyFunction.csproj", "MyFunction/"] 
RUN dotnet restore "MyFunction/MyFunction.csproj" 
COPY . . 
WORKDIR "/src/MyFunction" 
RUN dotnet build "MyFunction.csproj" -c Release -o /app/build

FROM build AS publish 
RUN dotnet publish "MyFunction.csproj" -c Release -o /app/publish

FROM base AS final 
WORKDIR /home/site/wwwroot 
COPY --from=publish /app/publish . 
ENV AzureWebJobsScriptRoot=/home/site/wwwroot \ 
    AzureFunctionsJobHost__Logging__Console__IsEnabled=true FROM mcr.microsoft.com/azure-functions/dotnet:4 AS base 
WORKDIR /home/site/wwwroot 
EXPOSE 80

FROM mcr.microsoft.com/dotnet/sdk:6.0 AS build 
WORKDIR /src 
COPY ["MyFunction/MyFunction.csproj", "MyFunction/"] 
RUN dotnet restore "MyFunction/MyFunction.csproj" 
COPY . . 
WORKDIR "/src/MyFunction" 
RUN dotnet build "MyFunction.csproj" -c Release -o /app/build

FROM build AS publish 
RUN dotnet publish "MyFunction.csproj" -c Release -o /app/publish

FROM base AS final 
WORKDIR /home/site/wwwroot 
COPY --from=publish /app/publish . 
ENV AzureWebJobsScriptRoot=/home/site/wwwroot \ 
    AzureFunctionsJobHost__Logging__Console__IsEnabled=true Required App Settings # Secret storage configuration
AzureWebJobsSecretStorageType = blob
AzureWebJobsStorage = <your-storage-connection-string>
# Docker configuration
WEBSITES_ENABLE_APP_SERVICE_STORAGE = false
WEBSITE_RUN_FROM_PACKAGE = 0
# Functions runtime
FUNCTIONS_WORKER_RUNTIME = dotnet
FUNCTIONS_EXTENSION_VERSION = ~4 # Secret storage configuration
AzureWebJobsSecretStorageType = blob
AzureWebJobsStorage = <your-storage-connection-string>
# Docker configuration
WEBSITES_ENABLE_APP_SERVICE_STORAGE = false
WEBSITE_RUN_FROM_PACKAGE = 0
# Functions runtime
FUNCTIONS_WORKER_RUNTIME = dotnet
FUNCTIONS_EXTENSION_VERSION = ~4 Why This Happens This issue is specific to Docker + Azure Functions because: Docker + Azure Functions Docker containers should be stateless and immutable
File-based secrets require mounted persistent storage
Mounting storage can overwrite containerized application files
The solution is using blob storage, which is stateless-friendly Docker containers should be stateless and immutable File-based secrets require mounted persistent storage Mounting storage can overwrite containerized application files The solution is using blob storage, which is stateless-friendly Non-dockerized function apps don’t have this problem because they naturally have access to the App Service file system. Summary Problem: Dockerized Azure Functions return 401 when using file-based secret storage without mounted volumes. Problem: Solution: Use blob-based secret storage, which is stateless and Docker-friendly. Solution: Key Settings: Key Settings: AzureWebJobsSecretStorageType = blob WEBSITES_ENABLE_APP_SERVICE_STORAGE = false This configuration allows your Docker container to remain stateless while still securely accessing authentication keys from Azure Blob Storage. Troubleshooting a similar issue? Feel free to reach out in the comments below! Troubleshooting a similar issue?

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How to Fix 401 Unauthorized Errors in Dockerized Azure Functions

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