Setting up a proxy server in Red Hat Linux can be done by following the steps below. First, you will need to determine the IP address and port of the proxy server that you plan to use. Once this information is gathered, open your network settings from System Settings > Network. Select Proxy Configuration from the sidebar menu and select Manual Proxy Configuration. Enter the IP address and port number for your proxy server into their respective fields then click Apply followed by OK. The new settings should now be applied and any data sent out through your internet connection will go through the designated proxy server.