Is div inside list allowed? [duplicate]

Yes it is valid according to xhtml1-strict.dtd. The following XHTML passes the validation:

<?xml version="1.0"?>
<!DOCTYPE html PUBLIC "-//W3C//DTD XHTML 1.0 Strict//EN"
    "http://www.w3.org/TR/xhtml1/DTD/xhtml1-strict.dtd">
<html xmlns="http://www.w3.org/1999/xhtml" xml:lang="en" lang="en">
<head>
    <meta http-equiv="Content-Type" content="text/html; charset=utf-8" />
    <title>Test</title>
</head>
<body>
<ul>
  <li><div>test</div></li>
</ul>
</body>
</html>

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