A couple of days ago, I’ve encountered this error when I was trying to create a SSH tunnel from my office LAN to a remote server.
After looking for a solution, I found out that the remote SSH server must add “PermitTunnel yes” line in “/etc/ssh/sshd_config” file.
To do that, you need to:
sudo echo "PermitTunnel yes" >> /etc/ssh/sshd_config service sshd restart
The second line is used to restart the ssh service in order to enable the changes.