It is available with Azure AD premium subscription.
SanthoshB1 is correct, you need AAD Premium to get this working out of the box.
However, if you are a bit into Powershell scripting then you should be able to write a script that can read a users security group profile (retrieved from AD using AD Connect) and add members to unified groups using the Add-UnifiedGroupLinks cmdlet to add members to a unifiedgroup based on a security profile.
Thanks for the link to the documentation. If we don't have the premium Azure AD, and we convert Dynamic distribution lists that were set up in Exchange to "Groups" would the membership in that group then have to be maintained by the Group owner?
I am creating some documentation for our users and I noticed that using the People directory shows Dynamic Distribution lists, but doesn't show the membership. I was thinking of converting to Groups, but will have to work out the maintenance of membership.
correct in that case the owner will have to manage the members. I highly recommend in that case to have multiple owners.
Would love to see dynamic Office 365 Group functionality without AAD Premium licenses! A dynamic group is great for areas such as when adding a new student to their respective graduating year "group". Or all students to a "All Students" group, new employee to an "All Employees" group, etc. Dynamic Exchange groups make this easy.
An as a side note, being able to "nest" the new Office 365 groups would make management of these groups much easier as well. An example is custodians, kitchen, office staff, all members of "Employees - Other", "Teachers - Middle School", "Teachers - Grade School", "Teachers - High School" groups all members of "Teachers", and Teachers and "Employees - Other" groups both members of an "All Employees" group. Works well with nested distribution groups or nested security groups, but I have to manage many more group members with the new Groups. A step back in manageability.