We're running Windows 8.1 x86 and have a GPO that, among other things, restricts access to all drives.

In all Office applications, when a user clicks File > Save As > Computer > Browse (or any recent folders like 'Desktop', 'Documents' etc.) it throws an error:  "This operation has been cancelled due to restrictions in effect on this computer. Please contact your system administrator." When the user clicks 'OK', they are able to save to the Desktop or Documents folder without further error.

When this policy setting is disabled, this error no longer appears. 

So the policy isn't actually causing problems with functionality, it just causes an error which is confusing and annoying to the users. 

Has anyone experienced this before? Or can anyone point me in the right direction for a resolution?

Thanks in advance!!

This should be the correct behavior of this policy. If you enable this policy, users cannot view the contents of the selected drives in My Computer and Windows Explorer.

But this policy does not prevent users from using programs to access local and network drives, in your case, use Office to access the drives.

For the specific error, it should come from the Windows system, not from the Office side. Maybe Windows server-Group policy forum is a better place for the question.

"But this policy does not prevent users from using programs to access local and network drives, in your case, use Office to access the drives."

I am using Office to access the drives, Kapaal. The only place that we allow users to save documents is the desktop and this functionality works - it just throws an error every time you try to save.

I'll post in the Group Policy forum and see if I can get an answer.

Thanks!