For details about error message "Cannot initialize SFTP protocol. Is the host running a SFTP server?" see:
https://winscp.net/eng/docs/message_cannot_initialize_sftp_protocol

The PC that works is running 3.7.1, so I ported it over. Uninstalling 3.7.6 was successful, installing 3.7.1 went fine; also copied all files from the working PC's WinSCP3 subdirectory. The host configurations were retained from the prior install, however (I guess they're in the Registry?), but used the same settings including UID. And, gladly, it works! I am able to connect to each of two AIX servers on the new PC using the older version of WinSCP3 with the saved sessions (using SFTP). PuTTY still works also (it had no problem to start with). So I hope the log tail I provided gives some clue about the difference underneath -- but I'll just stick to 3.7.1 (Build 257) until I hear of a fix. Thank you, by the way, for a tool that I find essential to my daily productivity in cross-platform tasks!

Are you you using the same version of WinSCP on both PCs? Do you have the same session configuration? The same username?

I have the same problem. It is a new PC, just downloaded and installed WinSCP3, and setting it up is no problem. I have other PCs with WinSCP that connect to two hosts just fine, but the new one kepps getting the error: "Cannot initialize SFTP protocol. Is the host running a SFTP server?" So I know the answer is yes. Detail says "Connection has been unexpectedly closed. Server send command exit status 1." I turned on logging and it shows near complete success:
. 2005-11-28 10:01:37.175 Trying to enable encryption...
. 2005-11-28 10:01:37.175 Initialised Blowfish encryption
. 2005-11-28 10:01:37.175 Installing CRC compensation attack detector
. 2005-11-28 10:01:37.175 Waiting for the server to continue with the initialisation
. 2005-11-28 10:01:37.215 Successfully started encryption
. 2005-11-28 10:01:37.215 Sent username "vonhuene"
. 2005-11-28 10:01:37.215 Waiting for the server to continue with the initialisation
. 2005-11-28 10:01:37.235 Session password prompt (vonhuene@binc-eldb02.binc.net's password: )
. 2005-11-28 10:01:37.235 Using stored password.
. 2005-11-28 10:01:37.235 Sending password with camouflage packets
. 2005-11-28 10:01:37.235 Sent password
. 2005-11-28 10:01:37.235 Waiting for the server to continue with the initialisation
. 2005-11-28 10:01:37.265 Authentication successful
. 2005-11-28 10:01:37.265 Started session
. 2005-11-28 10:01:37.265 --------------------------------------------------------------------------
. 2005-11-28 10:01:37.265 Using SFTP protocol.
. 2005-11-28 10:01:37.265 Doing startup conversation with host.
> 2005-11-28 10:01:37.265 Type: SSH_FXP_INIT, Size: 5, Number: -1
. 2005-11-28 10:01:37.265 Sent 9 bytes
. 2005-11-28 10:01:37.265 There are 0 bytes remaining in the send buffer
. 2005-11-28 10:01:37.265 Waiting for another 4 bytes
! 2005-11-28 10:01:37.295 usage: sftp [-1Cv] [-B buffer_size] [-b batchfile] [-F ssh_config]
! 2005-11-28 10:01:37.295 [-o ssh_option] [-P sftp_server_path] [-R num_requests]
! 2005-11-28 10:01:37.295 [-S program] [-s subsystem | sftp_server] host
! 2005-11-28 10:01:37.295 sftp [[user@]host[:file [file]]]
! 2005-11-28 10:01:37.295 sftp [[user@]host[:dir[/]]]
! 2005-11-28 10:01:37.295 sftp -b batchfile [user@]host
. 2005-11-28 10:01:37.295 Waiting for another 4 bytes
. 2005-11-28 10:01:37.315 Server sent command exit status 1
. 2005-11-28 10:01:37.315 Server closed network connection
. 2005-11-28 10:01:37.315 Waiting for another 4 bytes
* 2005-11-28 10:01:37.315 (ESshFatal) Cannot initialize SFTP protocol. Is the host running a SFTP server?
* 2005-11-28 10:01:37.315 Connection has been unexpectedly closed. Server sent command exit status 1.

Are you able to connect using any other SFTP client? To turn on togging see Logging tab on login dialog.

cannot initialize sftp protocol.is the host running a sftp protocol.

It was working before and others can connect to same servder through winscp3.

can you help in diagnosing the problem.Please let me know where are logs stored
Thanks so much