In an external BGP (eBGP) session, by default, the router changes the next hop attribute of a BGP route (to its own address) when the router sends out a route. If the BGP Next Hop Unchanged feature is configured, BGP will send routes to an eBGP multihop peer without modifying the next hop attribute. The next hop attribute is unchanged.
There is an exception to the default behavior of the router changing the next hop attribute of a BGP route when the router sends out a route. When the next hop is in the same subnet as the peering address of the eBGP peer, the next hop is not modified. This is referred to as third party next-hop.
The BGP Next Hop Unchanged feature provides flexibility when designing and migrating networks. It can be used only between eBGP peers configured as multihop. It can be used in a variety of scenarios between two autonomous systems. One scenario is when multiple autonomous systems are connected that share the same IGP, or at least the routers have another way to reach each other’s next hops (which is why the next hop can remain unchanged).
A common use of this feature is to configure Multiprotocol Label Switching (MPLS) inter-AS with multihop MP-eBGP for VPNv4 between RRs.
Another common use of this feature is a VPNv4 inter-AS Option C configuration, as defined in RFC4364, Section 10. In this configuration, VPNv4 routes are passed among autonomous systems between RR of different autonomous systems. The RRs are several hops apart, and have neighbor next-hop unchanged configured. PEs of different autonomous systems establish an LSP between them (via a common IGP or by advertising the next-hops--that lead to the PEs--via labeled routes among the ASBRs--routes from different autonomous systems separated by one hop). PEs are able to reach the next hops of the PEs in another AS via the LSPs, and can therefore install the VPNv4 routes in the VRF RIB.
The BGP Next Hop Unchanged feature can be configured only between multihop eBGP peers. The following error message will be displayed if you try to configure this feature for a directly connected neighbor:
%BGP: Can propagate the nexthop only to multi-hop EBGP neighbor