Q:

nginx: [emerg] "stream" directive is not allowed here

I have the latest NGINX from ppa installed on Ubuntu 16.04.

nginx version: nginx/1.12.1

From my understanding, it should support stream and UDP load balancing.
But I get this error message:
nginx: [emerg] "stream" directive is not allowed here in /etc/nginx/conf.d/load-balancer.conf:3

This is my config in /etc/nginx/conf.d/load-balancer.conf
stream {
        upstream backend {
                least_conn;
                server 172.31.9.51 fail_timeout=10s;
                server 172.31.20.140 fail_timeout=10s;
        }

        server {
                listen          500 udp;
                listen          4500 udp;
                proxy_pass      backend;
                proxy_timeout   1s;
                proxy_responses 1;
                error_log       logs/dns.log;
        }
}

A:

stream needs to be on the same level as http block so like
http { foo }
stream { bar }

My guess is your include for /etc/nginx/conf.d/*.conf is located in the http {} block and not outside of it. Checkout the /etc/nginx/nginx.conf for the include and maybe you have to make a new one for the stream section

