If you’re running a more secure network and using a proxy it’s not a bad idea to allow Azure AD Connect to by-pass the proxy…but your network team might hate you and sometimes you just have to play ball. If you try to configure it to run through the proxy you might run into this error, now it’s been inconsistent. At times I’ve seen this error and other times I’ve been allowed through, but this configuration will ensure that you won’t have issues.
You might even have your proxy configured in IE or via Windows. AAD Connect uses .Net though to access your proxy and if you need it in place you need to edit a .Net file.
Navigate to c:\windows\microsoft.net\framework64\%version%\config\machine.xml
In my case
scroll to the bottom of the page and enter the following text
your proxy address should include the complete address http(s)://URL:port
Save it, and you should be able to run this through your proxy server. Again if you can, it’s much better to run Azure AD Connect outside of your proxy server due to the amount of data that’s transferred.