Tried to reproduce on 55.0.2883.28 (Official Build) beta (64-bit).

A new window opens with an empty tab and the expected URL.

I can't repro either. I do get an empty tab which is annoying, but the URL also opens.

When you add it, do you have the box to open as window checked?

When you tried to repro, were you running Windows? I can only reproduce it there -- it still works fine for me on Chrome OS.

I'm 99% sure I had the "open as window" box checked.

Ah, I tested on Linux. It works for me with and without 'open as window' checked.

I'll try to find a Windows box to test on.

Unable to reproduce the issue on windows-7 and Linux Ubuntu-14.04 using chrome stable version 55.0.2883.87 and canary 57.0.2969.0 with the steps mentioned in Comment#0.
Reporter@ could you please upgrade the Chrome to latest version and let us know your observations if the issue still persists.

Thanks..

It sounds like the issue might be specific to Windows 10. Can you reproduce it on a Win10 machine?

Thank you for providing more feedback. Adding requester "sureshkumari@chromium.org" for another review and adding "Needs-Review" label for tracking.

For more details visit https://www.chromium.org/issue-tracking/autotriage - Your friendly Sheriffbot

I can't reproduce this with Windows 10.10586. 

Someone with a repro should attach the .LNK file from their desktop for examination.

I just tried to reproduce again on Windows 10 and am no longer able to.

Seems it fixed itself? Could it have been an OS thing?

I can reproduce the issue with Chrome M56 on Windows Server 2012 R2, and found that one root cause is app_id blacklisted by Chrome policy ExtensionInstallBlacklist. 

Ex. when user creates a desktop shortcut to www.youtube.com, it creates a shortcut with flag "--app-id=kpbjendadlidinhojbhaolefbllkmbjc". If this app id is blacklisted by ExtensionInstallBlacklist, double-clicking the shortcut opens a blank new window.

This may be working as intended, but from user point of view it should be improved. From the option name "Add to desktop" it is difficult for users to associate the feature with extension blacklists. Also, the behavior seems inconsistent because the shortcut works if user double-clicks it before closing Chrome browser, i.e.

1) Open a URL and create a desktop shortcut from Settings > More tools > Add to desktop
2) Double-click the desktop shortcut _without_ closing existing Chrome browser window
3) New window opens the URL, even if ExtensionInstallBlacklist is set to * (everything)

What controls ExtensionInstallBlacklist, and what is the purpose of it?

In my case, I was unable to create a bookmark for https://inbox.google.com/u/0/ (presumably because it was blacklisted by Chrome policy) but I was still able to navigate to that URL separately and use the site just fine.

Chrome policies ExtensionInstallBlacklist and ExtensionInstallWhitelist control which Chrome extensions to allow users to install and use. This is typically set by enterprise/education admins via Admin Console or Active Directory. Check if you find these policies in chrome://policy.

These policies does not affect web browsing, ex. blocking Google Hangouts extension does not prevent users from accessing hangouts.google.com.

Cleaning up "Needs-Review" label as we are not using this label for triage. Ref  bug 684919 

Issue has not been modified or commented on in the last 365 days, please re-open or file a new bug if this is still an issue.

For more details visit https://www.chromium.org/issue-tracking/autotriage - Your friendly Sheriffbot