Inquiry on how to execute migration of one domain to new domain in the same tenant

A safe approach is to treat this as a domain addition/change within the existing Microsoft Entra tenant, rather than creating a second tenant.

Before making changes, confirm exactly what “new domain” means, because the post appears to contain a typo (domain1 is used for both). If the goal is to add domain2.com to the existing tenant:

Inventory the current environment

Users, groups, shared/resource mailboxes

  UPNs and primary SMTP addresses
  
     Applications and service principals
     
        SSO/SAML/OIDC configurations
        
           Conditional Access policies
           
              Any on-premises AD/Entra Connect synchronization
              
                 DNS records and third-party services using the domain
                 
                 **Add and verify the new domain**
                 
                    In Microsoft Entra admin center, add the custom domain.
                    
                       Create the required DNS TXT record with the domain registrar.
                       
                          Verify ownership before changing user identities.
                          
                          **Plan the identity changes** Decide whether users should:
                          
                             Keep their existing UPN and receive the new domain only as an email alias, or
                             
                                Have their UPN changed to the new domain.
                                
                                Changing UPNs can affect applications, scripts, profiles, SSO configurations and user sign-in, so test this with a small pilot group first.
                                
                                **Handle Exchange Online separately** If email is involved, add the new domain to Exchange Online and configure the appropriate DNS records. Decide which address should remain the primary SMTP address and which should be an alias.
                                

1. Pilot first Test with a few users before changing everyone. Check:

Microsoft 365 sign-in

• Outlook/Exchange

Teams

OneDrive/SharePoint

Office activation

Mobile devices

Third-party SSO applications

Security precautions Take an export/inventory of the current configuration, document the existing DNS records, review Conditional Access and authentication policies, and ensure you have emergency/break-glass administrator accounts before changing UPNs.

Downtime Simply adding and verifying a new domain normally doesn't require tenant-wide downtime. The risk comes from changing UPNs, SMTP addresses, DNS, synchronization rules, or applications that depend on the old domain. DNS propagation can also take time.

I would not change all users at once. Add and verify the new domain, pilot 5–10 users, validate all dependent services, then perform the broader migration in batches.

One important clarification: if they actually mean moving the organization from one Microsoft Entra tenant to another, that's a completely different migration and requires a much more extensive plan.