UPDATE: This process seems to be outdated, and refresh schema should be done from AAD Connect Wizard. See this link from MS for details. Thank you Nuno, for pointing it out!

When upgrading AD Connect from a previous version (not DirSync or AD Sync, but an earlier version of AD Connect) I encountered this error when the upgrade process tried to configure synchronization rules:

I had actually upgraded the AD Schema from Windows Server 2012 to Windows Server 2012 R2 (because of Device Writeback) after initially installing AD Connect, but didn’t think this would impact upgrade of AD Connect. In my case it turns out the upgraded AD Schema actually caused this error message (assumption based on the fact that the upgrade succeeded after performing the steps below).

The fix? Easy:

• Open Synchonization Service Manager on the AAD Connect Server
• Navigate to “Connectors”
• Select the connector named after your On-Premises Active Directory
• Start action “Refresh Schema”

Conclusion:

If you installed AAD Connect, then upgraded your AD Schema, you might get into trouble when trying to upgrade AAD Connect.