Public bug reported:

$ lsb_release -a
No LSB modules are available.
Distributor ID: Ubuntu
Description:    Ubuntu Bionic Beaver (development branch)
Release:        18.04
Codename:       bionic

$ uname -a
Linux alex-VirtualBox2 4.15.0-13-generic #14-Ubuntu SMP Sat Mar 17 13:44:27 UTC 
2018 x86_64 x86_64 x86_64 GNU/Linux

$ apt-cache policy network-manager
  Installed: 1.10.6-2ubuntu1
  Candidate: 1.10.6-2ubuntu1
  Version table:
 *** 1.10.6-2ubuntu1 500
        500 bionic/main amd64 Packages
        100 /var/lib/dpkg/status

$ apt-cache policy dnsmasq
  Installed: (none)
  Candidate: 2.79-1
  Version table:
     2.79-1 500
        500 bionic/universe amd64 Packages
        500 bionic/universe i386 Packages

Once I set:
dns=dnsmasq # <- this line was added

DNS resolving stops to work.

$ ping
ping: Temporary failure in name resolution

$ nslookup

** server can't find SERVFAIL

it's only one setting I changed. /etc/NetworkManager/dnsmasq.d folder is empty.

** Affects: network-manager (Ubuntu)
     Importance: Undecided
         Status: New

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  Network manager doesn't work with option: dns=dnsmasq

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