notifyDataSetChanged() not updating RecyclerView Adapter

I am working on a very simple implementation of a RecyclerView that displays data stored in a ViewModel. I am still very new to Android development and am trying to learn the fundamentals. In this situation, all the data to be stored in the ViewModel is stored in a simple list, later on I want to use Room to do this but right now I am struggling to get things working. Currently adding an item to the list only adds that item to the private member (_mainList) of the ViewModel, the public member (mainList) is unchanged, and this is the member passed into the adapter constructor call.

ViewModel:

class ListViewModel : ViewModel() {
    private val _mainList = mutableListOf<String>()
    val mainList = _mainList.toList()

    fun addMainListItem(item: String) {
        _mainList.add(item)
    }
}

Adapter:

class MainAdapter(private var list: List<String>) :
    RecyclerView.Adapter<MainAdapter.ViewHolder>() {

    class ViewHolder(view: View) : RecyclerView.ViewHolder(view)

    override fun onCreateViewHolder(parent: ViewGroup, viewType: Int): ViewHolder {
        val view = LayoutInflater.from(parent.context).inflate(R.layout.list_item, parent, false)
        return ViewHolder(view)
    }

    override fun onBindViewHolder(holder: ViewHolder, position: Int) {
        holder.itemView.list_item_text.text = list[position]
    }

    override fun getItemCount(): Int {
        return list.size
    }
}

Fragment that displays the list:

class MainListFragment : Fragment() {
    private val viewModel: ListViewModel by activityViewModels()
    private var _binding: FragmentMainListBinding? = null
    private val binding get() = _binding!!
    lateinit var adapter: MainAdapter

    override fun onCreateView(
        inflater: LayoutInflater, container: ViewGroup?,
        savedInstanceState: Bundle?
    ): View {
        _binding = FragmentMainListBinding.inflate(inflater, container, false)
        val root: View = binding.root
        return root
    }

    override fun onViewCreated(view: View, savedInstanceState: Bundle?) {
        super.onViewCreated(view, savedInstanceState)
        // Add click listener to floating action button
        binding.fabMain.setOnClickListener {
            addListItem()
        }
        adapter = MainAdapter(viewModel.mainList)
        main_list_view.adapter = adapter
        main_list_view.layoutManager = LinearLayoutManager(requireContext())
    }
    
    private fun addListItem() {
        val input = EditText(activity)
        input.setHint("Enter the name of your new list item")
        input.inputType = InputType.TYPE_CLASS_TEXT
        activity?.let {
            val builder = AlertDialog.Builder(activity)
            builder.apply {
                setTitle("Add List Item")
                setView(input)
                setPositiveButton(
                    "Add"
                ) { dialog, id ->
                    val newItem = input.text.toString()
                    viewModel.addMainListItem(newItem)
                    adapter.notifyDataSetChanged()
                }
                setNegativeButton("Cancel"
                ) { dialog, id ->
                    dialog.cancel()
                }
            }
            builder.create()
            builder.show()
        }
    }
}

    private fun addListItem() {
        val input = EditText(activity)
        input.setHint("Enter the name of your new list item")
        input.inputType = InputType.TYPE_CLASS_TEXT
        activity?.let {
            val builder = AlertDialog.Builder(activity)
            builder.apply {
                setTitle("Add List Item")
                setView(input)
                setPositiveButton(
                    "Add"
                ) { dialog, id ->
                    val newItem = input.text.toString()
                    viewModel.addMainListItem(newItem)
                    adapter.addItem(newItem)
                }
                setNegativeButton("Cancel"
                ) { dialog, id ->
                    dialog.cancel()
                }
            }
            builder.create()
            builder.show()
        }
    }

add Method in the adapter also make list to ArrayList and public visibility

fun addItem(item: String){
   if(!list.contains(item)){
       list.add(item)
    }
}

Or if you want to observe changes from ViewModel then add the observing event in your fragment. ViewModel list observing events is best practice in your case.