Comment 14 for bug 1624320

Using a clean 17.04 install, I could observe the same problem.

Against convention, our company is using .local as the internal DNS TLD.

As mentioned in #8 and #13 above, /etc/resolv.conf was symlinked to

root@dell-e5470:~# ls -l /etc/resolv.conf
lrwxrwxrwx 1 root root 29 Apr 5 09:19 /etc/resolv.conf -> ../run/resolvconf/resolv.conf

which contains

---
# cat /run/resolvconf/resolv.conf
# Dynamic resolv.conf(5) file for glibc resolver(3) generated by resolvconf(8)
# DO NOT EDIT THIS FILE BY HAND -- YOUR CHANGES WILL BE OVERWRITTEN
# 127.0.0.53 is the systemd-resolved stub resolver.
# run "systemd-resolve --status" to see details about the actual nameservers.

nameserver 127.0.0.53
---

After removing the symlink /etc/resolv.conf and linking like this:

# ln -s /run/systemd/resolve/resolv.conf /etc/resolv.conf

...thinks started working again. Now the file contains the DNS received via DHCP:

-----
# cat /etc/resolv.conf
# This file is managed by systemd-resolved(8). Do not edit.
#
# This is a dynamic resolv.conf file for connecting local clients directly to
# all known DNS servers.
#
# Third party programs must not access this file directly, but only through the
# symlink at /etc/resolv.conf. To manage resolv.conf(5) in a different way,
# replace this symlink by a static file or a different symlink.
#
# See systemd-resolved.service(8) for details about the supported modes of
# operation for /etc/resolv.conf.

nameserver 1.2.3.4
search local.example.com example.local
-----