Start Windows PowerShell as an administrator, navigate to the copied NanoServerImageGenerator folder on the local hard drive, and run the following cmdlet:

Set-ExecutionPolicy RemoteSigned
Import-Module .\NanoServerImageGenerator -Verbose

Create a VHD for the Nano Server as a Hyper-V host by running the following PowerShell cmdlet. This command prompts you for an administrator password for the new VHD.

New-NanoServerImage -Edition Standard -DeploymentType Guest -MediaPath <"input the path to the root of the contents of Windows Server 2016 ISO"> -TargetPath <"input the path, including the filename and extension where the resulting VHD/VHDX will be created"> -ComputerName <"input the name of the nano server computer you are about to create"> -Compute

In the following example, we create a Nano Server VHD with the feature Hyper-V host with failover clustering enabled. This example creates a Nano Server VHD from an ISO mounted at f:\. The newly created VHD is placed in a folder named NanoServer in the folder from where the cmdlet is run. The computer name is NanoServer and the resulting VHD contains the standard edition of Windows Server.

New-NanoServerImage -Edition Standard -DeploymentType Guest -MediaPath f:\ -TargetPath .\NanoServer.vhd -ComputerName NanoServer -Compute -Clustering

With the cmdlet New-NanoServerImage, configure parameters that set the IP address, the subnet mask, the default gateway, the DNS server, the domain name, and so on.

For deployment on a VM, create a new VM in Hyper-V Manager and use the VHD created in Step 3.

For deployment on a physical host, copy the VHD to the physical computer and configure it to boot from this new VHD. First, mount the VHD, run bcdboot e:\windows (where the VHD is mounted under E:\), unmount the VHD, restart the physical computer, and boot to the Nano Server.

Log in to any computer in the domain and create a data blob by running the following PowerShell cmdlet:

$domain = "<input the domain to which the Nano Server is to be joined>"
$nanoserver = "<input name of the Nano Server>"

djoin.exe /provision /domain $domain /machine $nanoserver /savefile C:\temp\odjblob /reuse

Copy the odjblob file to the Nano Server by running the following PowerShell cmdlets on a remote machine:

$nanoserver = "<input name of the Nano Server>"
$nanouname = ""<input username of the Nano Server>"
$nanopwd = ""<input password of the Nano Server>"

$filePath = 'c:\temp\odjblob'
$fileContents = Get-Content -Path $filePath -Encoding Unicode

$securenanopwd = ConvertTo-SecureString -AsPlainText -Force $nanopwd
$nanosecurecred = new-object management.automation.pscredential $nanouname, $securenanopwd

Invoke-Command -VMName $nanoserver -Credential $nanosecurecred -ArgumentList @($filePath,$fileContents) -ScriptBlock \{
    param($filePath,$data)
    New-Item -ItemType directory -Path c:\temp
    Set-Content -Path $filePath -Value $data -Encoding Unicode
    cd C:\temp
    djoin /requestodj /loadfile c:\temp\odjblob /windowspath c:\windows /localos
}

Reboot the Nano Server.

Open Services from the Tools section of Server Manager.

Right-click Services (Local).

Click Connect to Server.

Provide the Nano Server details to view and manage the services on the Nano Server.

Open Hyper-V Manager from the Tools section of Server Manager.

Right-click Hyper-V Manager.

Click Connect to Server and provide the Nano Server details. Now the Nano Server can be managed as a Hyper-V server to create and manage VMs on top of it.

Open Failover Cluster Manager from the Tools section of Server Manager.

Perform clustering-related operations with the Nano Server.