Recently in my project, I encountered this error while importing one of the workflows from DEV. to QA. Environment When we tried to publish the workflow in the QA environment we got the following error.
This workflow cannot be created, updated or published because it was created outside the Microsoft Dynamics CRM Web application. Your organization does not allow this type of workflow.
Strangely enough the entire workflow was built in dev. using the Workflow designer in CRM and it was not custom XAMl based workflow.So we started checking for all the steps of the workflow and we found that the error is in the workflow is because of Send-email step.
On further investigating the fact we found that the error is because we were using Queues as the sender and the error was because of the Queue Guid. We just selected the queue manually in the QA environment in the FROM of the e-mail and then everything worked fine.
Off-course you can get this error for other reasons. However this can be one of the reason for getting this error.
Hope this helps!