This is most likely a firewall issue on the database server you're trying to connect to.

but it's all on the same server.

maybe this has something to do with it. i'm running this on a windows server 2008 platform. when i installed laravel, the re-direct to the public directory would not work, i had to enter the public directory directly in order for it to pull up a web page. do you think this would have anything to do with it?

Hi tproudfit,

Are you using Windows Autentication or SQL Server Authentication (adding a username/password to the server)? Do you use a port number when connecting in SQL Server Management Studio?

I use SQL Server auth personally, here's an example setup of my own. (SQL Server auth, TCP/IP turned on with port number of 4444)

'sqlsrv' => array(
	'driver'   => 'sqlsrv',
	'host'     => '127.0.0.1,4444', // Port is one that I configured.
	'database' => 'ApplicationDatabase',
	'username' => 'test_user',
	'password' => 'password123',
	'prefix'   => '',
),

Let me know your config and I'm sure I can get you on the right path ;)

Regarding the public folder issue.

Your webroot folder should point to /public, not the root of the repository. (This means that very few files exist where they could potentially become visible to the public.) If you use IIS, you can import the .htaccess file in IIS to get your web.config generated.