How to add a Dropdown item on the action bar

First option:

menu/options.xml:

<item
    android:icon="@drawable/ic_menu_sort"
    android:showAsAction="ifRoom">
    <menu>
        <item
            android:id="@+id/menuSortNewest"
            android:title="Sort by newest" />
        <item
            android:id="@+id/menuSortRating"
            android:title="Sort by rating" />
    </menu>
</item>

Second option:

menu/options.xml:

<menu xmlns:android="http://schemas.android.com/apk/res/android">
    <item
        android:id="@+id/menuSort"
        android:showAsAction="ifRoom"
        android:actionLayout="@layout/action_sort"  />
</menu>

layout/action_sort.xml:

<Spinner xmlns:android="http://schemas.android.com/apk/res/android"
    android:layout_width="wrap_content"
    android:layout_height="wrap_content"
    android:background="@drawable/ic_menu_refresh"
    android:entries="@array/order" />

Docs for menu resources – http://developer.android.com/guide/topics/resources/menu-resource.html