To resolve this problem make the following changes in your Windows 7 system and the mac.
On Windows 7
Change the LAN Manager Authentication level and Minimum session security for NTLM SSP based clients settings from Local Group Policy editor
1. Click Start – search for “gpedit.msc” and press enter. This should launch the Local Group Policy Editor.
2. In the left pane navigate to “Local Computer Policy – Computer Configuration – Windows Settings – Security Settings – Local Policies – Security Options“
3. In the rightpane look for “Network Security: LAN Manager authentication level”, double-click and change its default value to “Send LM & NTLM – use NTLMv2 session if negotiated“. Click Apply and OK.

4. Look for “Network Security: Minimum session security for NTLM SSP Based (including secure RPC) Clients” and double-click to edit. Uncheck the box for “require 128 bit” and click Apply and OK.

5. Restart the computer for changes to take effect.
On Mac
On MAC in file sharing, click options and check the box “Share using SMB“.
This should resolve the problem.
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This is not working. Searching for “gpedit.msc” returns nothing. Windows is also too dumb to find it in a regular file search. I mean there must be a “real” way to access the Network Security settings application without having to jump through hoops…. but then again, it’s Windows. Nothing works in Windows, I should have learned that by now.
Thanks!
I was banging my head against he wall trying to figure this out. Also, several other sites that professed to have teh solution did not. Yours worked like a charm!