If you want create new domain, yes it's possible. You can also use Entra Domain Services managed domain for virtual machine in Azure to avoid creating new domain.
If you want promote a new domain controller in a existing domain , you should configure VPN between Azure and on-premise network to ensure AD replication.
Please take a look at this article if you have a existing domain:
Tutorial: Create a site-to-site VPN connection in the Azure portal
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