ul list with ajax items is not build correctly
$drop_value=isset($form_state['values']['dropdown'])?$form_state['values']['dropdown']:$default_value;
$form['images']['drop_area'] = array(
'#markup' =&gt; '
&lt;div class="ui-widget ui-helper-clearfix"&gt;
  &lt;div id="newloc" class="ui-widget-content ui-state-default"&gt;
    &lt;ul id="newloclist_ul" class="itemlist ui-helper-reset ui-helper-clearfix"/&gt;
    '.get_items($drop_value).'
    &lt;/ul&gt;
  &lt;/div&gt;    
&lt;/div&gt;',
'#prefix' =&gt; '&lt;div id="drop_area"&gt;',
'#suffix' =&gt; '&lt;/div&gt;',
);
function get_items($drop) {
  ...
  //builds li elements
  return $li_elements;
}


In your above code try after remove the "/" at the end of ul tag.

Then your code should be :

&lt;ul id="newloclist_ul" class="itemlist ui-helper-reset ui-helper-clearfix"&gt;