Where are you trying to perform this action from? If you are using the Entra ID/Azure AD portal, this is by design, as distribution lists are managed via Exchange. Use the Microsoft 365 Admin Cener instead, or the Exchange Admin center.
For example, via the M365 Admin Center, go to Users > Active users > click on the user in question to open the Details pane > under General, click Manage groups > Assign Memberships.