Hi @Waleed Waleed,
To help you better, I want to confirm that if all that emails from O365 send to on-premises shown as external. If no, this issue may be related to this rule. If yes, you can do the following to check:
- You can use EAC navigate to Mail flow > Accepted domains, check hybrid routing domain (tenant.mail.onmicrosoft.com), this domain should be configured as “Internal Relay” as opposed to “Authoritative”.
- Use the following command to check the value of the send connector you use to send to on-premises from O365: Get-SendConnector "XXXX" | Format-List. Make sure the CloudServicesMailEnabled set to true.
- If needed, you can re-run Hybrid Configuration wizard to see if messages from O365 can be treated as internal messages.
If you have any questions, please feel free to contact me.