If your intention is to say "what time it is now", you can say both "é madrugada" or "é de madrugada".
If your intention is to say "when something happens", then use only "de madrugada".
- Que horas é a festa? (What time is the party?)
- É de madrugada. (It's in the early hours)
I don't understand the use of "de" in this sentence. I translated it as "It is the dawn" but DL marked it wrong and gave "It is dawn" and "It is at dawn" as correct translations. I would expect "It is dawn" to be translated as "É a madrugada" and "It is at dawn" to be translated as "É à madrugada."
Can someone please shed a little light on my confusion?
Well, actually the portuguese grammar says that expressions like "de madrugada", "de manhã", etc.. are classified as "locução adverbial". I don't know exactly how to translate that in english, but I guess it is something like an "adverbial phrase". In essence, it is two or more words playing the role of an adverb. I'm sure my explanation sounds confusing :) I hope the links below can help you better
Often, if you don't care much about prepositions, you can learn better. Prepositions get their meanings only in full expressions.
And "de madrugada", "de manhã", "de tarde" and "de noite" are expressions for telling what time it is or what time something is going to take place.
Certain expressions are definitely exceptions to the patterns, such as "à tarde" and "à noite" for telling when something is taking place. But "manhã" and "madrugada" do not accept "à".
Strictly, if sun has risen, you can indeed see it. There are conventions on this, originating from navigational use of the sun, moon and stars. (There are terms like "nautical twilight" and "civil twilight" which are defined by the angle between the horizon and the top of the sun. If I recall correctly, what is generally referred to as dawn and dusk are the periods when the top of the sun is between 0 and 6 degrees UNDER horizon, i.e. before sunrise and after sunset when there is still some light from reflected and bent rays. As for "daybreak", I don't know any official definition, but since it's called "break" I tend to say it's the moment when the top of the sun breaks horizon, i.e. the same as sunrise. :-)
Don't try to be too logical when it's about prepositions (well... languages too, but especially prepositions).
The expression "de madrugada" is usual and makes plenty of sense in Portuguese. It means "(in) the early hours".
If follows the same pattern as "de manhã", "de tarde" and "de noite": (In the) morning, (in the) afternoon, (at) night.