Server :: Configuring Sendmail For A Private Network?

My goal is to have users(Unix Users like root on host1) use evolution /sendmail to send and receive emails between users( Unix users either from host1 or any other host on n a private network. The network is a private network with a few servers without any connection to Internet and no DNS. They resolve one another by /etc/hosts. with smtp configured am able to send and receive emails on one machine(host1) from unix user abc on host1 to user xyz on host1 and vice versa. the commad i used to test is host1@abc #echo "this is a test mail" |mailx zyx@host1 But when i tried sending from user abc on host1 to user xyz on host2 its giving error for DNS unable to resolve hostname.

the commad i used to test is host1@abc# echo "this is a test mail" |mailx zyx@host2 create a simple sendmail config so that i can send mails between multiple hosts using unix usernames within one network. I can use one of the server as mail server and rest as clients. I dont want to configure any other softwares for pop or imap access. I want to keep it simple and use evolution on the clients to send emails between one another on the private network without internet.