AD Groups not displayed in SharePoint People Picker

Issue description

A user had created and Active Directory group and was not able to see the group in SharePoint People Picker

SharePoint version: SharePoint 2010 SP2

Cause                                                                                                                                             

The Active Directory group was created as a Distribution group

Resolution                                                                                                                                   

Active Directory groups should be a created as Security group (not Distribution group) to get listed in SharePoint People Picker.

Distribution groups cannot be used as security instances, such as assigning permissions to them. SharePoint uses Active Directory to authenticate a user. In order to do this, it must be a security principle that SharePoint is working with. Distribution groups are not security principles.