Q. Can a virtual machine running in Hyper-V be a domain controller (DC)?

A. Absolutely, and many organizations are doing so. However, the usual best practices still apply, as do some others.

You might think that having only one DC and using clustering to makes the DC highly available. Bad idea. If you do a live migration (only available in Hyper-V under Windows Server 2008 R2, which is currently in beta) of the DC in a planned situation and the DC stays online, you should be fine. You should also be fine if the DC in the VM fails over and is brought offline, so long as the DC failure is temporary. If the VM crashes and doesn't recover, however then the cluster might not authenticate against the DC and the cluster service might not start, so you could lose your cluster. Therefore, you need to ensure you always have at least two DCs. You should also make sure that you don't host both DCs on the same cluster node, because if the cluster node fails you won't have access to the domain, which might cause cluster problems.

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