SmtpException: The client or server is only configured for e-mail addresses with ASCII local-parts

If the DeliveryFormat property of your SmtpClient instance is set to SmtpDeliveryFormat.SevenBit (the default) then you need to make sure your SMTP gateway is replying with SMTPUTF8 when sent EHLO by .NET while it's trying to send the email. SmtpClient uses this to work out if the gateway is able to support UTF8.

If the DeliveryFormat is SmtpDeliveryFormat.International, then you will be able to send regardless.

Late answer, but, I solved this by specifying encoding like this:

var mailMessage = new MailMessage
            {
               From = new MailAddress("[email protected]", "Test User", Encoding.UTF8)
}

In my case, the server was causing the error.