How can I set up local wildcard (127.0.0.1) domain resolution on 18.04..20.04?

Here are the steps for ubuntu since 18.04. It's a little bit long since systemd-resolved does not play very well with NetworkManager when configured with dnsmasq.

Yet I still recommend starting dnsmasq from NetworkManager, because network connectivity changes (WIFI, wired, ...) will be handled transparently.

Enable dnsmasq in NetworkManager

Edit the file /etc/NetworkManager/NetworkManager.conf, and add the line dns=dnsmasq to the [main] section, it will look like this :

[main]
plugins=ifupdown,keyfile
dns=dnsmasq

[ifupdown]
managed=false

[device]
wifi.scan-rand-mac-address=no

Let NetworkManager manage /etc/resolv.conf

sudo rm /etc/resolv.conf ; sudo ln -s /var/run/NetworkManager/resolv.conf /etc/resolv.conf

Configure example.com

echo 'address=/.example.com/127.0.0.1' | sudo tee /etc/NetworkManager/dnsmasq.d/example.com-wildcard.conf

Reload NetworkManager and testing

NetworkManager should be reloaded for the changes to take effect.

sudo systemctl reload NetworkManager

Then we can verify that we can reach some usual site :

dig askubuntu.com +short
151.101.129.69
151.101.65.69
151.101.1.69
151.101.193.69

And lastly verify that the example.com and subdomains are resolved as 127.0.0.1:

dig example.com askubuntu.example.com a.b.c.d.example.com +short
127.0.0.1
127.0.0.1
127.0.0.1

First make sure in /etc/NetworkManager/NetworkManager.conf the following line is not present or commented out:

dns=dnsmasq

Restart NetworkManager:

sudo systemctl restart NetworkManager

Make sure the NetworkManager-controlled dnsmasq is not running anymore, either by killing the process or rebooting your system.

Then install dnsmasq:

sudo apt install dnsmasq

Add the following to /etc/dnsmasq.d/example.com:

address=/example.com/127.0.0.1

Restart dnsmasq:

sudo systemctl restart dnsmasq

Now you should have a wildcard dns override for example.com.