Right, my hack is almost the same as --no-hosts, it just doesn't require
patching libvirt.

Do you need that entry in your /etc/hosts? If you have a real DNS name,
you might not need it at all. If not, but you have a static IP address,
you could use that in the hosts file instead of 127.0.1.1.

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https://bugs.launchpad.net/bugs/1326536

Title:
  libvirt's dnsmasq setup will read /etc/hosts on the host, resulting in
  odd resolution behaviour on the VM

Status in libvirt package in Ubuntu:
  Triaged
Status in lxc package in Ubuntu:
  Triaged

Bug description:
  When libvirt configures / starts up dnsmasq on the host, it does not
  pass --no-hosts, resulting in it reading in the /etc/hosts file from
  the host.

  The default ubuntu setup will have the host's hostname in /etc/hosts
  under 127.0.1.1. Since libvirt's dnsmasq is reading this file,
  anything querying that dnsmasq instance will resolve the host's
  hostname out of /etc/hosts.

  The result of this is any VM running on the host will resolve the
  host's hostname as 127.0.1.1. For example, if the host's hostname is
  BoxA, any VM running on the host will resolve BoxA to 127.0.1.1, which
  is not BoxA's actual address.

  Would recommend passing --no-hosts to dnsmasq when libvirt starts it
  up. If a user wants hardcoded hosts for their libvirt network, they
  can add them to /var/lib/libvirt/dnsmasq/default.addnhosts . If this
  is an acceptable solution, I'd be happy to write the patch up.

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