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What is the Minimum Role/Permission for a user to create a New Database on the SQL Server. I do not want to give sysadmin Permission because I have other databases that I do not want the user to be able to access.
I have tried giving DB_Creator permission, but it does not solve the issue, whenever the user tries to create a New DB, after entering the DB Name, we get error
"UserID or Password is not valid"
Please advice

Well, the server role "dbcreator" shouold be sufficient enough. But as you can see from the error message the problem is not the role, it's the user credentials.
So you have to make sure the Login/USser is properly set up in SQL Server and NAV!

Just curious, why would you want to have someone creating databases on your system that you don't trust well enough to be sysadmin?

Dear stryk,

well that's the first assumption even I made when I saw the error, but I could login to SQL Server and create a new database from SSMS using the user's credentials. Its only when I try to make a new database from the finsql cleint that I get the error, only after I enter the Name of the Database.
In normal scenario if the Credentials are wrong Nav client wouldn't even take me to the New Database form, right when you enter the credentials and press OK and the error is

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Microsoft Dynamics NAV Classic
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The login failed when connecting to SQL Server MSTDBS01.

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OK
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But in this case it gives an error when I enter the name of the New Database in the New Database Form and the error we get is

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Microsoft Dynamics NAV Classic
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The user ID and password are invalid. Try again.

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OK
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Could you try it out and see if it works for you.

Dear Mark

Well where I work, we have a Team of 30 for Dynamics Nav. We have one Development server with the Databases of all the project. As a part of administration of this server we would like our developers to be able to create New Databases and work on them as owners but we do not want them to make Server Level changes to the SQL Instance. Hence the need.

Are you really creating new databases often enough that this can't be managed by a small group of administrators? I also manage a central development environment with a similar number of developers. The databases are hosted across 2 SQL instances. In addition to my real job (billable work) I handle the administration of these systems plus associated Terminal Services and Hyper-V environments. Three other users also have administrative access. In the 5 plus years these systems have been running, I've seen no reason to make everyone an admin.