When trying to establish a connection between 2 M.T. routers if (on the server side) chose NOT to use IPSEC, and do the same on the client side, the link is established.

If on the other had I chose (on the server side) IPsec=required enter a password and do the same for the client , I get a log (on server side):

L2TP connection rejected no IPsec encryption while it was required .

On the client side I get:

L2TP: terminating...-tunnel was not encrypted

Obviously there is something going on with the encryption but cannot located it ...

Anyone please for ideas?

Check what happens with IPSec, peer status, logs, ...

I had a similar issue. The L2TP/IPSec creates a default Policy/Proposal/etc. I had an additional policy, an old one that I didn't use.

When I'd connect with Win7, it would pick the correct policy and establish ok.

When I'd connect from a Mikrotik, it would give me errors about no proposal.

I never did figure out why a Win 7 L2TP/IPSec could connect, but another Mikrotik couldn't. None the less, the solution for me was to delete the additional policy that I didn't need anyway.

I stumbled upon this problem today as well. A router running 7.1rc6 is connecting to a router running 7.2.1, and for some reason a stray dynamic peer entry had been left dangling on the client router. Removing the peer entry made it create a new one and the tunnel was successfully established again.