All extensions on the Barracuda Phone System must correspond to an extension number from a defined block of extensions. By default, the block range 2000-2999 is defined. Add or remove extension ranges (or blocks) on the Configuration > Extensions page as needed for your system. You cannot create an extension number if you have not created a block of extensions which includes that extension number.
Be sure to plan your extension blocks carefully. While a very large block of extensions might be appealing at first, if you find you need to change extensions in that block, you cannot just delete some extensions, but can only delete the entire extension block. To preserve extensions, you need to create a new block and change the primary extension number of each of the changing extensions to a number that appears in the new block.
Instead of creating a large block (the largest blocks available are 1000 extensions) it may be more advantageous to create blocks of 100-200 extensions each. Deleting a block of 100 extensions has a smaller impact than deleting a block with 1000 extensions.