To restrict all (or specific) users to sending only internal emails and block their emails when they’re sent to external recipients, follow the steps below:

1. Log in to your Office 365 portal, then go to the Microsoft 365 admin center by clicking the Admin app.
   
2. In the Admin centers section, click Exchange.
   
3. Then, in the Exchange admin center, click mail flow and then rules. Using the plus icon, add a new rule.
   
4. In the new rule window, under the Apply this rule if section, select The recipient is located > Outside the organization.
   
5. If you don’t want the rule to apply to all users, you can add another condition that narrows down its scope. To do so, click More options at the bottom of the window, and then click the add condition button (the button shows up once you have enabled more options). You can, for example, add a selected user group so that only its members won’t be allowed to send emails outside the organization.
   
6. In the Do the following section, select Block the message > reject the message and include an explanation.
   
7. Provide a short explanation that says why the email is blocked. Users will get this explanation along with an NDR message after trying to send an email outside the organization. You can also choose not to notify anyone and simply delete the message (by selecting the delete the message without notifying anyone option).
   
8. Save the changes to the rule and test whether it works as expected. Note that it may take up to 30 minutes before the changes to the rule take effect.
   

That’s it. Now, if the users included in this rule try to send emails outside the Office 365 organization, these messages will be rejected, and the senders will get the notification that their email was blocked.