Nginx reverse proxy setting

I am totally new to Nginx and need your help. Basically I have a single server with single IP address, but I want to host two different web application within the server with different domain name. So, basically, for each domain name, I want it to redirect to different port number. I tried below and got an error

[root@mysvr nginx]# nginx -t -c /etc/nginx/nginx.conf
nginx: [emerg] "proxy_pass" directive is not allowed here in /etc/nginx/nginx.conf:41
nginx: configuration file /etc/nginx/nginx.conf test failed

Following is the Nginx setting. Line 41 is where the proxy_pass is.

server {
  listen 80;
  server_name server1.com www.server1.com;
  proxy_set_header X-Real-IP $remote_addr;
  proxy_set_header Host $host;
  proxy_set_header X-Forwarded-For $proxy_add_x_forwarded_for;
  proxy_pass http://127.0.0.1:1003;
}

server {  
  listen 80;
  server_name server2.com www.server2.com;
  proxy_set_header X-Real-IP $remote_addr;
  proxy_set_header Host $host;
  proxy_set_header X-Forwarded-For $proxy_add_x_forwarded_for;
  proxy_pass http://192.168.1.1:1004;
}

Thank you!

If you check the docs for proxy_pass, proxy_pass needs to be in a location, if in location or limit_except block. You have it in a server block.

Try replacing your usage of proxy_pass with

location / {
    proxy_pass ...
}