Windows 10 May 2020 Update is breaking OneDrive Files On-Demand for some people

Microsoft has acknowledged OneDrive connectivity problems on some devices that have been upgraded to Windows 10 May 2020 Update (Windows 10 version 2004).

An error message reading "OneDrive cannot connect to Windows" informs affected users that Files On-Demand require an internet connection to function. The problem means that people are unable to access some of their files -- at least until they apply a workaround.

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Microsoft explains: "After updating to Windows 10, version 2004, some older devices or devices with certain older apps installed that use legacy file system filter drivers might be unable to connect to OneDrive via the OneDrive app.  Affected devices might not be able to download new Files On-Demand or open previously synced/downloaded files".

The full text of the error message is:

OneDrive cannot connect to Windows. Files On-Demand require a connection to Windows in order to show your files without taking up space on this device. OneDrive can keep trying to connect to Windows or you can choose to download all your files. You won't be able to use online only files until this is fixed.

While Microsoft is working on a fix, the company shares details of a workaround that helps with the problem in the meantime:

1. Select the Start button and type: cmd
2. Right click or long press on Command Promptand select Run as administrator.
3. Type or copy and paste the following command into the Command Prompt dialog: reg add HKLM\System\CurrentControlSet\Services\Cldflt\instances /f /v DefaultInstance /t REG_SZ /d "CldFlt"
4. Restart your device after the command has completed.
5. To verify Files On-Demand is still enabled, right click or long press on the OneDrive icon in the notification area, select Settings.
6. In the Settings dialog, verify that Save space and download files as you use them is enabled then select the OK 
7. If you are using more than a single OneDrive account within the app or are using both OneDrive Personal and OneDrive for Business, you will need to repeat steps 5 and 6 for each account.
8. OneDrive app should now connect and run as expected.

Microsoft says that a proper fix will be issued in a future release.