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I just installed Cygwin, and openssh ignores the known_hosts file. My guess is that openssh does not even see the ~/.ssh folder. I've defined a Windows environment variable HOME, and Cygwin does start in %HOME%. The permissions on ~/.ssh are 600, and permissions inside ~/.ssh are 600 for everything except that known_hosts and *.pub are 644. All i get is

$ ssh -vvv -Y foo
OpenSSH_6.1p1, OpenSSL 1.0.1c 10 May 2012
debug2: ssh_connect: needpriv 0
ssh: Could not resolve hostname learnlab: hostname nor servname provided, or not known

Note that I don't have the line debug1: Reading configuration data /etc/ssh/ssh_config, and what's even odder, Cygwin doesn't install /etc/ssh.

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up vote 0 down vote accepted

It turned out I had to not only set %HOME%, but also to create a mount point for /home/myhome.

$ cat /etc/fstab.d/myhome 
c:/Users/myhome/My\040Documents /home/myhome    ntfs    binary  0       0
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Please mark this answer as accepted. – neersighted Dec 22 '12 at 16:17

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