Nginx proxy pass chaining issue

My setup is as follows: I have server 1 which is open to public and server 2 which is open only to server 1.

Request should come to the server 1 and then get proxied to server 2 which proxies it further to a backend app running locally. What actually happens is that request goes to the other/default server block instead to the subdomain1.domain.com.

When I curl the subdomain1.domain.com from the Server 1 the request is routed correctly. What am I missing?

I've also tried adding proxy_set_header Host $host; and proxy_redirect off; but none worked.

Server 1 config:

upstream my-api {
    server subdomain1.domain.com:80;
}

server {
    listen 443 ssl http2;
    server_name subdomain2.subdomain1.domain.com;

    ssl_certificate /path/file.cert;
    ssl_certificate_key /path/file.key;

    access_log /var/log/nginx/my-api.access.log;
    error_log  /var/log/nginx/my-api.error.log;

    location / {
        proxy_pass http://my-api;
        proxy_set_header X-Real-IP $remote_addr;
        proxy_set_header X-Forwarded-For $proxy_add_x_forwarded_for;
        proxy_set_header X-Forwarded-Proto $scheme;
    }
}

server {
    listen 80;
    server_name subdomain2.subdomain1.domain.com;
    return 301 https://$host$request_uri;
}

Server 2 config:

server {

    listen 80;

    server_name subdomain1.domain.com;

    access_log /var/log/nginx/api.en.access.log;
    error_log  /var/log/nginx/api.en.error.log;

    location / {
        proxy_set_header X-Real-IP $remote_addr;
        proxy_pass http://127.0.0.1:8001;
    }
}

Figured it out finally.

I have added this line to the Server 1 config: proxy_set_header Host subdomain1.domain.com;

Only then it ends up in the correct server block. I hope it also helps someone else.