Thanks to for Bill Simser for posting these steps.
If you are using Host Headers in your SharePoint Deployments and you try to access the site on the local machine using them you will not be able to do it because of this loopback error. Do the steps given below to easily do it.
- Click Start, click Run, type regedit, and then click OK.
- In Registry Editor, locate and then click the following registry key:
- Right-click Lsa, point to New, and then click DWORD Value.
- Type DisableLoopbackCheck, and then press ENTER.
- Right-click DisableLoopbackCheck, and then click Modify.
- In the Value data box, type 1, and then click OK.
- Quit Registry Editor, and then restart your computer.