It's in Egypt, or adjacent to Luxembourg (5)
I believe the answer is:
luxor
'it's in egypt' is the definition.
('Luxor' is part of 'egypt')
'or adjacent to luxembourg' is the wordplay.
'adjacent to' is a charade indicator (letters next to each other).
'luxembourg' becomes 'lux' (I can't explain this - if you can you should give a lot more credence to this answer).
'or' after 'lux' is 'LUXOR'.
Can you help me to learn more?
(Other definitions for luxor that I've seen before include "City of Egypt" , "Egyptian city on the east bank of the Nile" , "Egyptian city on the site of the ancient city of Thebes" , "Egyptian city sited on part of ancient Thebes" , "Nile town" .)