Distribution lists can be upgraded to Microsoft 365 Groups as per the instructions in the article below
Upgrade distribution lists to Microsoft 365 Groups in Outlook - Microsoft 365 admin | Microsoft Docs
Note: You can only upgrade cloud-managed, simple, non-nested distribution lists. The table lists distribution lists that CANNOT be upgraded.
Moreover, in order to check which DLs are eligible for upgrade prefer to the information below,
1. If you want to check whether a DL is eligible or not, you can run the below command:
Get-DistributionGroup <DL SMTP address> | Get-EligibleDistributionGroupForMigration
If you want to check which DLs are eligible for an upgrade just run the following command:
Get-EligibleDistributionGroupForMigration
2. Go to Classic Exchange Admin center --> recipients --> groups --> Click Get Started button under UPGRADE DISTRIBUTION LISTS section, as shown in the image below --> Now you can select from the list “Available for upgrade” or “Upgraded DLs”
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