Lives in the valleys out West (6)
I believe the answer is:
dwells
'lives in' is the definition.
(to dwell somewhere is to live there)
'valleys out west' is the wordplay.
'valleys' becomes 'dells' (dell is a kind of valley).
'out' means one lot of letters goes inside another.
'west' becomes 'W' (abbreviation).
'dells' enclosing 'w' is 'DWELLS'.
'the' acts as a link.
(Other definitions for dwells that I've seen before include "Lives in, inhabits" , "Lodges or resides" , "Establishes oneself" , "pauses" .)