Invalid application path

Hello,

I have setup one website. Created virtual directories and converted them to application" Also I used application pool using one domain account.

While testing setting, I am getting error "Invalid application path".

"Connect  as" set to "Application user(pass-through authentication)".

If I test virtual directories, it works fine but it gives above error after converting it to application. If I use one of the admin account under "connect as", it works fine. so only  "Application user(pass-through authentication)" is failing. I also tried adding applicaiton pool user to administrators group but still same error. Nothing comes in event viewer log.

Please suggest.

Thanks