Using Nginx upstream hosts with proxy_pass

Question

Below is the bare-bones stripped down Nginx config that demonstrates the problem I'm having directly. The "real-world" setup has multiple upstreams and multiple conditional checks that are omitted for clarity.

upstream barhost {
  server example.com;
}

server {
  listen 8080;

  location / {

    # this works fine if used directly:
    # proxy_pass http://example.com/;

    # this doesn't work, returns 404:
    proxy_pass http://barhost/;
  }
}

Results:

• Using proxy_pass http://example.com/; works perfectly fine, returns 200
• Using proxy_pass http://barhost/; (using upstream) it returns 404

Some background info:

• The whole point of this dynamic upstream is to act as an alternative workaround for this bountied and unsolved issue.
• I cannot use if() to accomplish this particular goal, as explained in a response to that related question, which is why I am going down this route (The idea is to use a map to decide on an upstream)
• It appears I cannot use map with the hostnames in it because Nginx will not resolve DNS if in a map, that's why I'm using upstream. I'm essentially trying to mimic this config.

What am I doing wrong here?

---

Somewhat related posts:

• nginx proxy_pass with dynamic upstream servers
• nginx dynamic proxy_pass with variable between redirections
• https://stackoverflow.com/questions/50121492/using-nginx-map-directive-to-dynamically-set-proxy-upstream

---

UPDATE:

Thanks to a helpful user in the comments, I've investigated the request header that is proxied to example.com in this scenario. It's being set to barhost which the server will give an invalid response to. This is the root cause of the issue.

So, with that known, I would like to set the Host header properly.

Setting the upstream name to match the desired Host header name does work:

upstream example.com {
  server example.com:80;
}

Hard coding Host header with proxy_set_header also seems to work:

upstream barhost {
  server example.com;
}

server {
  listen 8080;

  location / {

    # This works:
    proxy_set_header Host example.com;

    # None of these work:
    # proxy_set_header Host $host;
    # proxy_set_header Host $http_upstream_host;
    # proxy_set_header Host $proxy_host;

    proxy_pass http://barhost/;
  }
}

However, in my particular use-case it would ideal to instead set it dynamically using proxy_set_header using a variable - is that possible?