thanks @AlanKinane for reply. appreciate it.

yes I have gone though this link as well.
1. yes I have assigned "Virtual Machine User Login" role to that VM and resource group both.
2. in host-pool ->RDP properties-> advance I have also added targetisaadjoined:i:1
3. in host-pool I have assigned username@domain.com to this VM.

then I tried with "azuread\username@domain.com" , "AzureAD\username@domain.com" , "username@domain.com"
but it is not working and shows same error.

thanks,

I have just confirmed, we have per user MFA is disabled.

and MFA is enabled with conditional access only in our organization.

thanks @AlanKinane for the immediate response on this, really appreciate it.

yes I have rebooted that vm.

for MFA, I understood that we can use MFA in this setup, so we dint disturb that for this setup.
But for disabling the MFA, I would need to check with our org admin. as this is applied to all org users and to check its impact.

I will check and update.

thanks.

thanks @AlanKinane , we have excluded windows-vm sign-in from the CA policy and now it started working.