Friend of Dorothy embracing man in city (7)
I believe the answer is:
toronto
'city' is the definition.
(Toronto is an example)
'friend of dorothy embracing man' is the wordplay.
'friend of dorothy' becomes 'toto' (Dorothy's pet dog in The Wizard of Oz).
'embracing' means one lot of letters goes inside another.
'man' becomes 'ron' (short for Ronald).
'toto' placed around 'ron' is 'TORONTO'.
'in' is the link.
(Other definitions for toronto that I've seen before include "Canada's largest city" , "major city" , "Capital city of Ontario" , "Ontarian capital" , "Second city of Canada" .)