I entered ssh-host-config
into the cygwin prompt (started with admin privileges), said yes to privilege separation, new local account sshd, install sshd as a servic
I tried above solutions but nothing worked for me. I am using Windows 8 and was able to solve it. My sshd.log file says : "Privilege separation user sshd does not exist FAILED"
So to remove this error while starting sshd as service just following below steps:
Edit the file /etc/passwd --
add " sshd:x:74:74:Privilege-separated SSH:/var/empty/sshd:/sbin/nologin ".
Edit the file /etc/group -- add " sshd:x:74: ".
Now start service as net start sshd
It worked for me!