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The LMHOSTS (LAN Manager Hosts) file is used to enable Domain Name Resolution under Windows when other methods, such as WINS, fail. It is used in conjunction with workgroups and domains. If you are looking for a simple, general mechanism for the local specification of IP addresses for specific hostnames (server names), use the HOSTS file, not the LMHOSTS file.
The file, if it exists, is read as the LMHOSTS setting file. A sample file (lmhosts.sam) is provided. It contains documentation for manually configuring the file.
The file is located in %windir%\, and a sample file lmhosts.sam is installed here. The %windir% is an environmental variable.
The file is located in %windir%\system32\drivers\etc\, and a sample file lmhosts.sam is installed here.