What is the order in which GPOs are applied?

1- Local GPOs

2- Site GPOs: If multiple GPOs are linked, the highest in the list, with the number closest to1, has the highest precedence and applied last.

3- Domain GPOs: If multiple GPOs are linked, the highest in the list, with the number closest to1, has the highest precedence and applied last.

4- OU GPOs: GPOs linked to the OU highest in the AD hierarchy are added to the ordered list, followed by GPOs linked to its child OUs, and so on. If multiple GPOs are linked, the highest in the list, with the number closest to1, has the highest precedence and applied last.

5- Enforced GPOs: These are added at the end of the ordered list, so their settings will be applied at the end of the process and will, therefore, override settings of GPOs earlier in the list and in the process.

• Default Domain Controllers Policy
• Default Domain Policy
• Windows SBS Client - Windows XP Policy
• Windows SBS User Policy etc

Group Policy settings are processed in the following order:

1. Local Group Policy object—Each computer has exactly one Group Policy object that is stored locally. This processes for both computer and user Group Policy processing. 
2. Site—Any GPOs that have been linked to the site that the computer belongs to are processed next. Processing is in the order that is specified by the administrator, on the Linked Group Policy Objects tab for the site in Group Policy Management Console (GPMC). The GPO with the lowest link order is processed last, and therefore has the highest precedence.
3. Domain—Processing of multiple domain-linked GPOs is in the order specified by the administrator, on the Linked Group Policy Objects tab for the domain in GPMC. The GPO with the lowest link order is processed last, and therefore has the highest precedence.
4. Organizational units—GPOs that are linked to the organizational unit that is highest in the Active Directory hierarchy are processed first, then GPOs that are linked to its child organizational unit, and so on. Finally, the GPOs that are linked to the organizational unit that contains the user or computer are processed. At the level of each organizational unit in the Active Directory hierarchy, one, many, or no GPOs can be linked. If several GPOs are linked to an organizational unit, their processing is in the order that is specified by the administrator, on the Linked Group Policy Objects tab for the organizational unit in GPMC. The GPO with the lowest link order is processed last, and therefore has the highest precedence.