If you type the list in a different workbook, define a name with an external
reference to the list.

How?

Open the workbook that contains the list of drop-down entries.
Open the workbook where you want to validate cells, point to Name on the
Insert menu, and then click Define.
In the Names in workbook box, type the name.
In the Refers to box, delete the contents, and keep the insertion pointer in
the box.
On the Window menu, click the name of the workbook that contains the list of
drop-down entries, and then click the worksheet that contains the list.
Select the cells containing the list.
In the Define Name dialog box, click Add, and then click Close.
Select the cell where you want the drop-down list.
On the Data menu, click Validation, and then click the Settings tab.
In the Allow box, click List.
If the list is in the same worksheet, enter a reference to your list in the
Source box.
If the list is elsewhere, enter the name you defined for your list in the
Source box.

Make sure the reference or name is preceded with an equal sign (=).

"IT SIMPLY DOSN'T WORK. A WARNING IS DISPLAYED THAT YOU CANT USE A REFRENCE
TO A DIFFERENT WORKBOOK

Debra Dalgleish's technique has worked for me:
http://contextures.com/xlDataVal05.html

CHAIM wrote:

If you type the list in a different workbook, define a name with an external
reference to the list.

How?

Open the workbook that contains the list of drop-down entries.
Open the workbook where you want to validate cells, point to Name on the
Insert menu, and then click Define.
In the Names in workbook box, type the name.
In the Refers to box, delete the contents, and keep the insertion pointer in
the box.
On the Window menu, click the name of the workbook that contains the list of
drop-down entries, and then click the worksheet that contains the list.
Select the cells containing the list.
In the Define Name dialog box, click Add, and then click Close.
Select the cell where you want the drop-down list.
On the Data menu, click Validation, and then click the Settings tab.
In the Allow box, click List.
If the list is in the same worksheet, enter a reference to your list in the
Source box.
If the list is elsewhere, enter the name you defined for your list in the
Source box.

Make sure the reference or name is preceded with an equal sign (=).

"IT SIMPLY DOSN'T WORK. A WARNING IS DISPLAYED THAT YOU CANT USE A REFRENCE
TO A DIFFERENT WORKBOOK

--

Dave Peterson