7.35. ( SMTP Relay ) - Internal MASQed computers cannot send SMTP or POP-3 mail!

Though this isn't a Masquerading issue but many users do this so it should be mentioned.

SMTP: The issue is that you are probably using your Linux box as an SMTP relay server and get the following error:

"error from mail server: we do not relay"
Newer versions of Sendmail and other Mail Transfer Agents (MTAs) disable relaying by default (this is a good thing). So do the following to fix this:

POP-3: Some users configure their internal MASQ'ed computer's POP-3 clients to connect to some external SMTP server. While this is fine, many SMTP servers out there will try to IDENT your connection on port 113. Most likely your problem stems around your default Masquerade policy being set to DENY. This is BAD. Set it to REJECT and re-run your rc.firewall ruleset.