I need to install an Exchange2010 Server into my domain for test purpose only. We have a sub-domain test.mydomain.local where mydomain in the current AD domain. The scenario is to install exchange in only the sub-domain and the installation should cater only to the users in the test domain without affecting the parent domain. Is that possible? If yes, how?

As Explained by Steve, you will must prepare the parent domain for the schema updatation before you install Exchange 2010 in child domain. Setup.com/preparead command needs to be run on only Schema Master role which resides in parent domain. setup.com /preparead command will update the root domains configuration partition by adding Exchange schema and many other Exchange releated containers. Once the replication from Parent domain to child domain is successful you will have to install all prerequists for Exchange 2010 on child domains exchange server and install exchange 2010. Sudhir Bidye.Please remember to click Mark as Answer on the post that helps you, and to click Unmark as Answer if a marked post does not actually answer your question. This can be beneficial to other community members reading the thread.