Mail might tell you this, even when you’re using the correct password:

“The server {server name} rejected the password for user {username}. Please re-enter your password, or cancel.”
Products Affected

This message may appear several times while trying a correct password.

This can happen if the mail server is not available for authentication or cannot be contacted. Click Cancel, then wait a few minutes. After waiting, choose Go Online from the Mailbox menu, then enter the same password.

If this doesn’t help, you may indeed be using the wrong password, or it may have been changed. Then reset the password of the email account and try to do the same.

Reference link:
http://support.apple.com/kb/TA22531?viewlocale=en_US

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