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My main website is registered and hosted through DreamHost. I want to host a subdomain on DigitalOcean. I added a custom DNS record on DreamHost - type A with "value" equal to the IP address on DigitalOcean - and I added the domain under "DNS" on DigitalOcean, but the subdomain still appears to be hosted on DreamHost, since I'm seeing the default index when I open it in a browser.

Do I need to wait for something to propagate, or have I not set this up correctly?

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If you want to use DigitalOcean's DNS, you need to NS records instead of A records at dreamhost. If you just want to keep all the DNS at dreamhost, but still host the subdomain website at digital ocean, then creating the A record at dreamhost is all you need to do in terms of DNS.

Also, the fact that your subdomain appears to be hosted on Dreamhost implies that you have either a wildcard A record setup, or worse, another A record for that subdomain pointing to dreamhost's webserver.

If there is a preexisting A or CNAME record for your subdomain make sure to delete it. If there is a wildcard A record, then the "custom" A record will override it.

Regardless, yes, you will need to let it propagate.

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