Xbox Live Friend List Bug: How to Solve
By Andrew Lin

Xbox Live Friend List Bug will keep your from joining parties and playing games with friends.
Many players have reported on Thursday and Friday that they are experiencing problems joining games with people on their friends list. Microsoft has acknowledged the issue, and are currently working on a fix.
Xbox Live Friend List Bug: How to Solve
Some problems with the friends list began occurring yesterday, with an update that brought a bug which prevented matchmaking with Xbox live on all platforms.
We're aware that some users are seeing errors when starting or joining parties & our teams are investigating. We'll update here & on our status page when we have more info. https://t.co/PzAdjUFMJj
— Xbox Support (@XboxSupport) May 22, 2020
Among friends list issues, there is another bug that's affecting account management on Xbox Live. Creating and restoring accounts is also affected. This popped up around the same time the friends list bug occurred, and they could be related. Microsoft is working on that fix as well.
Games should be operating as normal, but you might encounter issues joining friends in games. You might also experience some issues with viewing achievements and friend activity. The issues seem to only affect the mechanics of the friends list, so you shouldn't have problems matchmaking with random players in your games.
The friends list bug is entirely server-side, so the only thing you can do to remedy this is it to wait until Microsoft fixes it on their end.