GitHub user weizhouapache added a comment to the discussion: VM instances get 
VR's IP as DNS server but cannot resolve through VR

> Upon further investigation inside the VR, I found that the dnsmasq service 
> does not listen on port 53 which is causing both DNS service not to function 
> and cloud-init inside VMs to fail get VM's password from VR.
> 
> By further looking into /etc/dnsmasq.conf file inside the VR, I have figured 
> out that problem is caused by two lines below:
> 
> #interface=eth0 # Disables binding dnsmasq to the guest NIC port=0 # Disables 
> listening on port 53
> 
> Uncommenting first line and commenting the second one followed by restarting 
> dnsmasq temporarily fixed the issue, making the VR a DNS resolver and 
> accessible by cloud-init as a data source for passwords.
> 
> I confirm that the network offering that the guest network is built with, has 
> all services including DHCP, DNS, and UserData enabled and mapped to 
> VirtualRouter.
> 
> So, I'm not sure why CloudStack is writing these two lines in dnsmasq config 
> file while DNS is enabled for the network offering. Also I have tried 
> upgrading the VR version to v4.18.1 (latest version for 4.18.x) but still get 
> the same result.
> 
> Any idea would be appreciated.

@fnavidan 
can you share `/etc/dnsmasq.d/cloud.conf` inside the VR ?

GitHub link: 
https://github.com/apache/cloudstack/discussions/11749#discussioncomment-14595200

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