I am trying to install multiple sites in a single installation on a local server.
But I don't have any idea about how to do this.
Can anybody tell me how to create multiples site using Drupal 6?
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If you want each site to be after your base domain (example.com/site1, example.com/site2), then do something like: In the sites directory you will make directories other than default that will have their own settings.php and files directories. One directory for each site. Then you make symbolic links in your document root to point whatever site name to your drupal directory. Index.php will magically take care of pointing to the right directory once everything is set up. I recommend checking out http://drupal.org/documentation/install/multi-site for more detailed instructions.
Depending on what you're trying to achieve, Domain Access could be an interesting solution too. For instance it would work well for affiliates sites which have localized as well as shared content.
Best documentation for what you are looking for is here: Multi-site - Sharing the same code base