Copilot Security Architecture: Where Your Data Goes

Overview

Security teams evaluating Copilot usually ask the same thing first: “Where does it actually look, and what keeps it from seeing too much?” The best way to answer that is to walk through the request flow the same way you’d walk through any enterprise architecture decision.

In this video, you’ll get a clear mental model of Copilot’s security architecture in GCC, GCC High, and DoD—starting with identity and tenant boundary, moving through permission-trimmed grounding, and ending with the controls you validate for a defensible rollout.

What You’ll Learn

• The Security Boundary: How Copilot operates inside your Microsoft 365 tenant and policy enforcement
• Permission-Trimmed Access: Why Copilot can only use the content a user can already access
• Grounding and Generation: How Copilot retrieves relevant context and generates responses
• Pilot Validation: Which controls to test first (Conditional Access, labels, DLP, audit, retention)

Script

Hook: Where does Copilot actually look?

Copilot can summarize a meeting, draft an email, or answer a question about a policy memo.

So the next question is obvious: where did it get that information—and what stops it from seeing too much?

In the next few minutes, I’m going to walk you through the Copilot request flow like a security architect would, so you can explain it clearly to leadership, auditors, and your own team. And I’ll call out what’s different—or what you should validate—when you’re operating in GCC, GCC High, or DoD.

Start with the boundary: tenant and identity

First, Copilot is an enterprise service experience in Microsoft 365. It’s not a public chatbot where you paste sensitive data and hope for the best.

Every Copilot interaction starts with the user’s identity in Microsoft Entra ID. That matters because the user’s session context still matters, too.

If you require MFA, if you require a compliant device, if you restrict access based on sign-in risk or location—those Conditional Access requirements can still apply to the user who’s using Copilot.

And here’s the key government framing: in GCC, GCC High, and DoD, the same first gate applies. Copilot operates under your tenant’s identity and policy enforcement. It doesn’t bypass your Conditional Access posture.

The most important rule: Copilot can only access what the user can access

Now let’s get to the most important rule in the entire Copilot security model.

Copilot can’t see data you can’t see.

Copilot uses the same permission model you already rely on across Microsoft 365.

That means if you don’t have permission to open a SharePoint or OneDrive file, Copilot can’t read it for you. If you don’t have access to a Teams team, channel, or meeting content, Copilot can’t pull that content into an answer.

So why do security teams still worry—and why is that worry reasonable?

Because even when access doesn’t change, discovery changes.

AI can surface overshared content much faster than a human could search. And Copilot can connect information across places users don’t normally look.

So in practice, your biggest “Copilot security” project often isn’t a new firewall rule. It’s permission hygiene and information governance.

Grounding: how Copilot finds relevant tenant content

Next is grounding.

Grounding means Copilot retrieves relevant content from your tenant to use as context before it generates an answer.

This is also where you want to avoid a common misconception. Copilot isn’t “reading everything you have.” It’s using Microsoft 365 retrieval capabilities—including Semantic Index for Copilot—to identify relevant items quickly.

And the retrieval process is still permission-trimmed. Copilot only retrieves content the current user is allowed to access.

In many Copilot experiences, you’ll also see references or citations. That’s important for security and governance because it gives the user—and your reviewers—a way to verify what content was used.

Generation: what happens to prompts, retrieved content, and responses

After Copilot has your prompt and the relevant grounding context, it uses large language models to generate a response.

The key point for a security review is that Copilot is designed to operate within Microsoft’s enterprise service boundary for your tenant.

And Microsoft’s documentation states that prompts and responses are not used to train the underlying foundation models.

For an ATO story, this is the section where you document data handling clearly: what content is retrieved for grounding, what’s transient processing, and what signals you retain through audit and compliance tooling.

Controls that matter most: what to validate in a pilot

Now, let’s make this practical.

If you’re running a pilot in a government environment, here are the controls I recommend validating first.

Start with identity and session controls: Conditional Access and MFA. Confirm who can use Copilot, and from what devices and locations.

Then validate data governance controls: sensitivity labels and encryption, DLP policies, and your retention and eDiscovery posture.

And finally, validate monitoring and accountability: confirm unified audit logging coverage and identify the specific Copilot-related events your agency needs to retain and review.

A good pilot test is simple. Pick a few users across roles. Confirm what Copilot can retrieve. Confirm how citations appear in the experience you’re enabling. And validate how labels and DLP affect outputs.

Close: a reuse-ready explanation

Here’s the one-sentence explanation you can reuse in a security briefing.

Copilot runs inside Microsoft 365 under the user’s identity, respects existing permissions, retrieves only permission-trimmed content for grounding, and generates responses protected by the same security and compliance controls you already enforce in your tenant.

Next up in this guide, we’ll go deeper on data residency, the permissions model, and the governance controls you’ll lean on day to day.

Sources & References

• How does Microsoft 365 Copilot work? — Tenant boundary and Copilot request flow overview
• Security for Microsoft 365 Copilot — Copilot security model and protections
• Data, Privacy, and Security for Microsoft 365 Copilot — Service boundary and data handling commitments
• Semantic indexing for Microsoft 365 Copilot — Semantic Index role in grounding and permission-aware retrieval context
• Microsoft Entra Conditional Access overview — Conditional Access concepts used for identity/session enforcement