Instant Run in IntelliJ 2017.3 and android:testOnly="true" make it impossible to run the apk on an emulator

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When I try to run my application from the IDE on an x86 emulator I get an error "Application Installation Failed" with the message

Failed to finalize session: INSTALL_FAILED_TEST_ONLY: installackageLI

As I understand this error is because Android Studio automatically adds the android:testOnly="true" manifest attribute on all debug builds which requires adb install to use the -t flag to install the apk. This flag should not however be required when running from the IDE itself.

If I add the -t flag in Install Flags in my build configuration the apk can be installed, though only if Instant Run is disabled (and only if I do a clean build if it was previously enabled). Re-enabling Instant Run produces the same error even when including the -t flag.

UPDATE:

The above occurs only when using android gradle plugin version 3.0.0.

When I revert to version 2.3.0 the problem disappears.

UPDATE 2:

This is related to IntelliJ IDE.

Android Studio 3.0 works fine with my configuration.

See the answers in this post.

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