How to resolve external hosts when using pfSense as firewall/router

pfSense 2.2.5 does not automatically resolve external hosts (but not hosts from the internet) using DNS servers provided by DHCP from the WAN interface. To force it resolve, do:

Navigate via Web UI:

• Services | DNS Resolver
• Scroll down to Domain Overrides
• Add entry
• Domain: [a domain suffix, e.g., test.org]
• IP address: [DNS server IP]

What are the side effects without the above changes?

• pfSense clients not able to access internet, especially when internet is controlled via a proxy.
• Windows clients unable to access Windows share even using FQDN