How to force nginx to resolve DNS (of a dynamic hostname) everytime when doing proxy_pass?

It's an intriguing question and AFAIK that's not going to work well. You can try to use the upstream module and use the directives for failover to see if it works as a hack.

2018 edit: a lot of things changed. Check the answer by @ohaal to get real information about this.

Accepted answer didn't work for me on nginx/1.4.2.

Using a variable in proxy_pass forces re-resolution of the DNS names because NGINX treats variables differently to static configuration. From the NGINX proxy_pass documentation:

Parameter value can contain variables. In this case, if an address is specified as a domain name, the name is searched among the described server groups, and, if not found, is determined using a resolver.

For example:

server {
    ...
    resolver 127.0.0.1;
    set $backend "http://dynamic.example.com:80";
    proxy_pass $backend;
    ...
}

Note: A resolver (i.e. the name server to use) MUST be available and configured for this to work (and entries inside a /etc/hosts file won't be used in a lookup).

By default, version 1.1.9 or later versions of NGINX cache answers using the TTL value of a response and an optional valid parameter allows the cache time to be overridden:

resolver 127.0.0.1 [::1]:5353 valid=30s;

Before version 1.1.9, tuning of caching time was not possible, and nginx always cached answers for the duration of 5 minutes..

There is valuable information in gansbrest comment and ohaal answer.

But I think it's important to mention this official nginx article, posted in 2016, it clearly explains nginx behaviour on this matter and the possible solutions: https://www.nginx.com/blog/dns-service-discovery-nginx-plus/

We indeed have to "Set the Domain Name in a Variable" and use the resolver directive.

however, using a variable changes the rewrite behaviour. You may have to use the rewrite directive, it depends on your location and proxy_pass setup.

PS: would have post a comment but not enough points yet...

ohaal's answer takes most of us there, but there is a case where the DNS resolver does not live at 127.0.0.1 (eg when you're in a special containerized environment)

In that case, you may want to change the nginx conf to resolver ${DNS_SERVER};. Then, before you start nginx, run

export DNS_SERVER=$(cat /etc/resolv.conf |grep -i '^nameserver'|head -n1|cut -d ' ' -f2)
envsubst '${DNS_SERVER}' < your_nginx.conf.template > your_nginx.conf

Note, that you need the gettext package installed, as that provides the envsubst command.