License fulfillment groups are the Azure AD groups that actually grant group members licenses to specific Microsoft products. Each Azure AD group you see in Azure Licensing Manager maps to a group in Azure AD. When you select a group in Azure License Manager as the license fulfillment group, the license bundle adds all assignees and eligible assignees as members of that corresponding ALM group, which in turn adds those assignees as members of the actual group in Azure AD.
To assign license fulfillment groups to license bundles, you need to have one of the following Management Roles:
License Admin for All Pools and Bundles
License Manager for All Bundles
License Manager for Bundles Where Owner
How to assign license fulfillment groups to license bundles
On the navbar, click Azure License Manager to expand it and then click Manage Assignments.
Select the License Bundles tab and search for license bundle to which you want to assign the license fulfillment group.
Click the License Bundle link for the target bundle.
On the License Bundle Details page, enter the License Fulfillment Group in the License Fulfillment Group drop-down and then click the tile for that group to select it.
You should see the License Fulfillment Group update to the selected group.