edit: This page is old and it may not work for you. You may wish to see the latest solution to this problem here.

The annoying thing is, when I see the message, I do exactly as Webmin suggests and I go ahead and edit the DNS servers settings, adding 127.0.0.1 to the list. Then when I apply the changes followed by testing the configuration, I'm greeted again with the annoying message:

"Virtualmin is configured to setup DNS zones, but this system is not setup to use itself as a DNS server"

After receiving the message, I will go again and check the DNS settings and the address 127.0.0.1 that I just edited is removed from the list. Gone.

I've googled and googled 'til my eyes went sore, but the only way that I've found to make the setting stick is to manually edit the resolv.conf file.

So if you're like me and you're having this problem, just open up a shell and modify the file yourself, go ahead and let webmin/virtualmin check your settings and you should be good this time.

Specifically, just edit the file location:

/etc/resolv.conf

... and above the existing nameservers, type in:

nameserver 127.0.0.1

Then let webmin check your settings again. If everything worked out, you should be good to go now.

If this does not solve the problem, then you may want to read this newer and better solution.