Azure Private DNS not resolving names from 2 vnets

I'm new with Azure, I've downloaded a template that contains 3 servers(SCCM Infrastructure + DNS server with a contoso.com domain)

I've created a separate Vnet and put a separate device there, I have configured peering so I can ping from machines in Vnet1, machines in Vnet2.

According to information I've read, I should be able to resolve machine names cross Vnets with a private DNS Zones. I've created one, it contains setting for auto registration for both sides, from Vnet1 and Vnet2 and yet I still can't resolve names cross Vnet.

I wanted to do some exercises in my trial Azure subscription and this is only task I can't get through;/ my goal is to make DNS resolve names cross Vnets + add the new created device from Vnet2 to Contoso domain in Vnet1 - Any hint here?

Thanks!