I assume you havnt got a catalytic converter, but manufacturers put lambda sensors as close to the engine block as possible, to get them to heat up quicker, to protect the cat.
they are usually fitted at the top of the down pipe in most new cars, or at the bottom of the exh manifold.
They need to be pretty hot 2 function correctly, so just put it as close to the exhaust exit on the block as possible.
James - 8v Mk2 Gti Campaign