In the active teams and groups page, you will find the "Add a Group" button. Select that
Next you will be asked to choose a group type. Here your choices are "Microsoft 365" and "Security". You will choose the group type that best meets your team's needs. Note that distribution groups have a separate group setup page, but it's setup procedure is the same.
Next you will name your group and add a description of the group if desired.
Now you will assign owners to the group. You need at least one. Think of them as admins for the group as they can add or remove members, delete conversations from the shared mailbox and change group settings. Owners can also rename the group, update the description and more.
Here you can add members to the group. More can be added as needed later.
Microsoft 365 groups allow teams to collaborate by giving them a group email and a shared workspace. This is where you will assign that email address for the team.