The idea is very simple you want to limit who can use sshd based on a list of users. The text file contains a list of users that may not log in (or allowed to log in) using the SSH server. This is used for improving security.
PAM (Pluggable authentication modules) allows you to define flexible mechanism for authenticating users. My previous  post demonstrated how to deny or allow users using sshd configuration option. However, if you want to block or deny a large number of users, use PAM configuration.

A note for new sys admins

  1. Backup all data and PAM configuration files before any modification :)
  2. Please be careful to perform the configuration option. Wrong configuration can lock down all login access including root access.
  3. Read this Linux-PAM configuration file syntax guide
  4. Now continue reading below for pam_listfile.so configration...

Use of pam_listfile.so module

This PAM module authenticates users based on the contents of a specified file. For example, if username exists in a file /etc/sshd/ssh.allow, sshd will grant login access.

How do I configure pam_listfile.so module to deny access?

You want to block a user, if user-name exists in a file /etc/sshd/sshd.deny file.
Open /etc/pam.d/ssh (or /etc/pam.d/sshd for RedHat and friends)
# vi /etc/pam.d/ssh
Append following line:
auth required pam_listfile.so item=user sense=deny file=/etc/sshd/sshd.deny onerr=succeed
Save and close the file
Now add all usernames to /etc/sshd/sshd.deny file. Now a user is denied to login via sshd if they are listed in this file:
# vi /etc/sshd/sshd.deny
Append username per line:
user1
user2
...
Restart sshd service:
# /etc/init.d/sshd restart
Understanding the config directives:
  • auth required pam_listfile.so : Name of module required while authenticating users.
  • item=user : Check the username
  • sense=deny : Deny user if existing in specified file
  • file=/etc/sshd/sshd.deny : Name of file which contains the list of user (one user per line)
  • onerr=succeed : If an error is encountered PAM will return status PAM_SUCCESS.

How do I configure pam_listfile.so module to allow access?

You want to ALLOW a user to use ssh, if user-name exists in a file /etc/sshd/sshd.allow file.
Open /etc/pam.d/ssh (or /etc/pam.d/sshd for RedHat and friends)
# vi /etc/pam.d/ssh
Append following line:
auth required pam_listfile.so item=user sense=allow file=/etc/sshd/sshd.allow onerr=fail
Save and close the file.
Now add all usernames to /etc/sshd/sshd.allow file. Now a user is allowed to login via sshd if they are listed in this file.
# vi /etc/sshd/sshd.allow
Append username per line:
tony
om
rocky
Restart sshd service (optional):
# /etc/init.d/sshd restart
Now if paul try to login using ssh he will get an error:
Permission denied (publickey,keyboard-interactive).
Following log entry recorded into my log file (/var/log/secure or /var/log/auth.log file)
tail -f /var/log/auth.log
Output: 
Jul 30 23:07:40 p5www2 sshd[12611]: PAM-listfile: Refused user paul for service ssh
Jul 30 23:07:42 p5www2 sshd[12606]: error: PAM: Authentication failure for paul from 125.12.xx.xx
Understanding the config directives:
  • auth required pam_listfile.so : Name of module required while authenticating users.
  • item=user : Check or specify the username
  • sense=allow : Allow user if existing in specified file
  • file=/etc/sshd/sshd.allow : Name of file which contains the list of user (one user per line)
  • onerr=fail : If filename does not exists or username formatting is not coreect it will not allow to login.