Yes, shahzadbux is correct. Here's some instructions:
1. Enter your list of names in Sheet2 (can be called anything).
2. Highlight the range and click the Formulas menu. In the Named Cell section click Name a Range.
3. Enter the named range you want to use (ie. MyListOfNames) and make sure the Refers To box is the range for your list of names and click OK.
Now to add the data validation
1. Click the column/cell/row that you want the validation to be applied to.
2. Select the Data menu and under the Data Tools section select Data Validation.
3. In the Allow box change to List, and then in the Source section enter in whatever you called the named range (ie. =MyListOfNames). You need to enter in the equals sign, then the named range name. Click OK.