Comment 8 for bug 389006

I had the same problem. I sent an HUP signal to dnsmasq and it started working.

sudo killall -s HUP dnsmasq

I hope it works for you too.

My diagnosis is that at the time dnsmasq is executed, the /etc/resolv.conf file is empty
since the NetworkManager cleans it and the main interface is not ready so it has
not been filled yet.

dnsmasq is started with --no-poll option. Therefore it cannot load the new /etc/resolv.conf
updated by the main interface. Sending HUP forces it to reload and then it works fine..
Dropping the --no-poll option from the Network Manager default should also help but
I could not find where it is.