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To create a drop-down list in Excel, first input the desired items in a separate sheet. Then, select the cells where you want the list to appear, go to Data Validation, choose List from the menu, and click on the Source button to select the items. Alternatively, you can directly type the items in the source box, separated by a comma. Named ranges can also be used. After selecting, click OK to finalize the list. Now you can easily pick an item from the drop-down list in your sheet.