Why doesn't systemd-resolved use my local DNS server?

So, changing my wired eth0 interface to be managed solved this issue for me.

Changing ifupdown to managed=true in /etc/NetworkManager/NetworkManager.conf

[ifupdown]
managed=true

Then restart NetworkManager

sudo systemctl restart NetworkManager

After this it works flawlessly..

This was not 100%. I also applied theses changes to try and kill resolver

sudo service resolvconf disable-updates
sudo update-rc.d resolvconf disable
sudo service resolvconf stop

Big thanks to this blog post regarding the subject: https://ohthehugemanatee.org/blog/2018/01/25/my-war-on-systemd-resolved/

Lets pray this works.. This whole systemd-resolve business is just so ugly.

My guess is that your systemd-resolved service is configured correctly, but it never gets to see the request. The .local domain is treated specially by systems running mDNS. avahi-daemon, which provides mDNS/DNS-SD services (aka "Bonjour" on Apple products) can be configured to take precedence over DNS during name resolution; it appears that Ubuntu does this.

There are a few options that you could choose from:

1. Rename your .local domain to something different (possibly .internal or .lan). This may be the easiest to do in practice because you just have to change a couple of things on your DNS server, and it works best with Avahi. I would recommend this method.

2. Alter your /etc/nsswitch.conf file by putting the dns entry in front of the mdns entries.

3. Alter Avahi's configuration to change the mDNS domain from .local to something else by editing /etc/avahi/avahi-daemon.conf and changing (or adding) domain-name=.something (located in the [server] section). You'll need to do this on every computer that uses mDNS so they still work together.