I just want to setup basic sendmail for my domain nothing fancy. I been to /usr/share/sendmail/cf and created mydomain.mc file -

OSTYPE(`openbsd')
DOMAIN(generic)
DAEMON_OPTIONS(`Family=inet, Address=0.0.0.0, Name=MTA')dnl
CLIENT_OPTIONS(`Family=inet, Address=192.168.25.4')
MASQUERADE_AS(`mydomain.net')
MASQUERADE_DOMAIN_FINE(`/etc/mail/masq')
MAILER(`local')
MAILER(`smtp')

then I did m4 ../m4/cf.m4 mydomain.mc > mydomain.cf
cp mydomain.cf /etc/mail/sendmail.cf

Now when I send mail, the From: header comes as user@hostname.domain and not user@domain.com.

Could anyone give me a hand with this? Thanks.

Typo?
shouldn't it be?
MASQUERADE_DOMAIN_FILE(`/etc/mail/masq')

I've also had to use this to fully masquerade emails:

FEATURE(`masquerade_envelope')

MASQUERADING AND RELAYING
http://www.sendmail.org/m4/masquerading_relaying.html

Thanks, yes that's a typo. I fixed it but that doesn't solve the original issue. Do I need to run sendmail and DNS on the same box?!

the sendmail.mc file is for compiling the changes u have done on the other files in /etc/mail. u also need to know what version of sendmail u are using( telnet "your maile server ip" 25) that will show u the version of sendmail u have, then look up the settings on the net.