I don’t know about you, but I kept getting this since upgrading putty to 0.61, as 0.60 didn’t do so before.

It would be an error of ‘Access Denied’ right after username entry, and all else would proceed as planned. Well I searched about it a bit and found the answer on superuser.com.

PuTTY tries several authentication methods in a row, which might cause these messages:

• GSSAPI (only if your system and the server have it enabled)
• Public key (only if you have a key loaded)
• Password

After receiving the “Access denied” message, hold Ctrl and right-click on the PuTTY window, then select Event log. At the bottom you will see what exactly caused the failure.

http://superuser.com/questions/312197/putty-0-61-why-do-i-see-access-denied-message-after-i-enter-my-login-id