Here is a brief tutorial about setting up new wireless hotspot in with ubuntu 12.04 and sharing internet using it.
Hardware used for testing : Dell XPS L502 (Intel Centrino 1030 wireless card)
Though this tutorial is tested in intel centrino wireless card, it should be applicable to all cards whose drivers uses mac80211 framework. (See the card testing part in answer)
Whether your wireless card support Access Point mode.
First thing to be done is perform the test whether your wireless card support going into wireless access point mode. As told earlier following test is for mac80211 framework based driver.
Install iw & execute following
sudo aptitude install iw
iw list
Look for supported interface section, where it should be a entry called AP like below
Supported interface modes:
* IBSS
* managed
* AP
* AP/VLAN
* monitor
* mesh point
If your driver doesn't shows this AP, It doesn't mean it can't create wireless hotspot. But those cards aren't in scope of this tutorial. For more tests follow ubuntu documentation on master mode.
The setup is divided in three sections,
- Setup & host a wireless network
- IP address setup
- Internet sharing
1.Setup and host a network
Changes you need to do:
- Change
interface=wlan0 to your wireless card name. (If you have one wireless card it should be wlan0)
ssid=test. test is the name of yout hosted network.
wpa_passphrase=1234567890, 1234567890 is the password of your network.
The configuration above creates a wpa & wpa2 enabled access point in g mode. A more detailed instruction to build configuration file can be found here
Now start the hostapd. Using the following command,
sudo hostapd hostapd-minimal.conf
It should start a wireless network. In your mobile device now you can see a wireless network and can authenticate. But the device won't get ip address. Press ctrl+c to stop it.
If you get any error, possibly your card doesn't support g mode. Try with other >modes. Guide
Part 2: Set up dhcp server for ip address management
Install isc-dhcp-server 
In gedit, press ctrl + o , in location box paste /etc/dhcp/dhcpd.conf
Find (ctrl+f) below lines and put # before it. It should look like after editing
# option definitions common to all supported networks…
#option domain-name “example.org”;
#option domain-name-servers ns1.example.org, ns2.example.org;
Again comment out following lines too
#default-lease-time 600;
#max-lease-time 7200;
Add following lines at end
subnet 10.10.0.0 netmask 255.255.255.0 {
range 10.10.0.2 10.10.0.16;
option domain-name-servers 8.8.4.4, 208.67.222.222;
option routers 10.10.0.1;
}
Range describe how long the address pool will be. you need to adjust subnet value also. This config can assigne ip upto 15 devices
Again press ctrl+o in gedit and paste following in location bar /etc/network/interfaces,Add below
auto wlan0
iface wlan0 inet static
address 10.10.0.1
netmask 255.255.255.0
wlan0 is your wireless interface. Change it accordingly.
Note: After reboot the wireless will be shown as not managed. So you
can't use any other wi-fi network. To get wireless with normal
behaviour, put # before those newly added line and execute sudo start
networking
now run
sudo start isc-dhcp-server
sudo hostapd hostapd-minimal.conf
At this point , your mobile device will see a network, authenticate it & after authentication it will get ip address something like 10.10.0.2.
Setup internet connection settings
For Internet connection sharing we need ip forwarding and ip masquerading.
Enable ip forwarding : execute
echo 1| sudo tee /proc/sys/net/ipv4/ip_forward
Now say you are using to a dial up/usb modem connection to connect to INTERNET. You need to get the logical interface name. For that execute ifconfig
For dialup/usb modem: it should be ppp0. If you want to share Ethernet connection you should use ethXwhere X is your ethernet device number.
Now once you get the interface name execute
sudo iptables -t nat -A POSTROUTING -s 10.10.0.0/16 -o ppp0 -j MASQUERADE
The ppp0 in above command is the interface whose internet connection you are sharing over wireless.
If you have edited upto /etc/network/interfaces you can use this script to start the service. Edit it if you are not sharing ppp0. if you are using script and want to stop the server, use sudo killall hostapd
I will try to update script later, to try if I can automate all the steps.
Please feel free to edit it to make it more useful.
Great helps from :