This feature will help you better manage group memberships by allowing you to build dynamic Azure AD Security Groups and Microsoft 365 groups based on other groups. For example, you can now create Dynamic-Group-A with members of Group-X and Group-Y.
The groups that define the membership of the dynamic group can be any group type represented in Azure Active Directory, such as user or device security groups, Microsoft 365 groups, and groups synced from on-premises. Unlike existing nested security groups today, memberOf dynamic groups return a flat list of members, so they can be used for licensing assignment and application assignment.
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