dropdownlist set selected value in MVC3 Razor

You should use view models and forget about ViewBag Think of it as if it didn’t exist. You will see how easier things will become. So define a view model:

public class MyViewModel
{
    public int SelectedCategoryId { get; set; }
    public IEnumerable<SelectListItem> Categories { get; set; } 
}

and then populate this view model from the controller:

public ActionResult NewsEdit(int ID, dms_New dsn)
{
    var dsn = (from a in dc.dms_News where a.NewsID == ID select a).FirstOrDefault();
    var categories = (from b in dc.dms_NewsCategories select b).ToList();

    var model = new MyViewModel
    {
        SelectedCategoryId = dsn.NewsCategoriesID,
        Categories = categories.Select(x => new SelectListItem
        {
            Value = x.NewsCategoriesID.ToString(),
            Text = x.NewsCategoriesName
        })
    };
    return View(model);
}

and finally in your view use the strongly typed DropDownListFor helper:

@model MyViewModel

@Html.DropDownListFor(
    x => x.SelectedCategoryId,
    Model.Categories
)

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