There are a couple of ways to do it, but I’ll describe what is probably the easiest
1)Go to the Manage Domains Section of the Dreamhost Control Panel and clilck the Add a Domain / Sub-domain link at the bottom of the page.
2)Fill out the “Fully Hosted” form, entering the sub-domain name and other info requested,being sure to “pull down” the selction box for “FTP user / CGI-runs-as user:” , and select the last option, "Create a New User"
3) Indicate the user name of the “new user” you want created
4) Enter the directory name you want that user to control
5) Make sure other option in that form are set up as you want them.
6)Submit the form by hitting the “Fully host this domain now” button.
Give the system time to create the user, and the domain (you can tell they are “ready” when the “clock” icon next to the domain in the Domains->Manage Domains page and the user in the Users->Manage Users is no longer showing) then go the the Users-> Manage Users page and set up the user’s permissions and/or disk space limits.
Note: Disk space quotas are assigned per “user”, not by “domain” or “subdomain” - by having a seperate user being the only one with ftp rights to a domain or subdomain, and limiting that user’s disk space, you have effectively limited the “domain” or “sub-domain”.
All done! Good Luck !