L3VPN Configuration Guide for Cisco 8000 Series Routers, Cisco IOS XR Releases

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L3VPN Configuration Guide for Cisco 8000 Series Routers, Cisco IOS XR Releases

VXLAN key concepts

Updated: June 17, 2026

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Explains core principles of VXLAN, including packet format, tunnel endpoints, and load sharing mechanisms, enabling users to grasp essential components and operational behavior of VXLAN technology.

A VXLAN key concept is a foundational component or behavior in VXLAN networking that

  • defines the structure and encapsulation of VXLAN packets

  • enables VTEPs to bridge overlay and underlay networks, and

  • utilizes source UDP port mapping to achieve efficient load sharing.

VXLAN packet format

Here is the VXLAN packet format.

Figure 1. VXLAN Packet Format

VXLAN tunnel endpoints

A VXLAN tunnel endpoint is a physical or virtual router that

  • connects overlay and underlay networks

  • uses a unique loopback interface IP address in the transport network, and

  • encapsulates Ethernet frames for transmission through an IP interface.

Additional reference information

A VXLAN tunnel endpoint (VTEP) can be a physical or virtual router that connects the overlay and underlay networks. A VTEP device is identified in the IP transport network by a unique loopback IP address. The VTEP uses this address to encapsulate Ethernet frames and transmits the encapsulated packets through the IP interface. Source and destination VTEPs create a stateless tunnel to deliver traffic from one host to another. When a frame destined for a remote host arrives, it is encapsulated in IP and UDP headers. Each VTEP can support up to 8,000 VXLAN tunnel interfaces.

How load sharing with VXLANs works

Most data center transport networks are designed with multiple redundant paths and employ multipath load-sharing technologies to distribute traffic loads efficiently. VXLAN encapsulated packets traverse these paths based on the underlying network's forwarding decisions.

Summary

The key components involved in the process are:

  • VTEPs: Serve as the source and destination for VXLAN packets in the network.

  • ECMP: Allows simultaneous use of multiple best paths in the transport network by balancing traffic loads.

  • UDP port numbers (source and destination): Used in VXLAN packet headers; the source UDP port uniquely identifies flows for load-sharing.

Load sharing with VXLANs enables efficient traffic distribution across multiple redundant paths in transport networks. The process utilizes ECMP and the variable VXLAN source UDP port to differentiate flows and optimize path usage.

Workflow

The process involves these stages:

  1. Multipath design and ECMP deployment: Transport networks are configured as IP-routing networks that use ECMP to balance traffic load among multiple best paths.
  2. VXLAN packet flow creation: VTEPs encapsulate packets with identical destination IP and UDP port numbers. The source UDP port is varied for each VXLAN flow, creating unique flow identifiers.
  3. Load-share hashing and flow differentiation: The transport network uses the VXLAN source UDP port for load-share hashing, ensuring that flows are distributed across available ECMP paths. This helps avoid out-of-sequence packet forwarding and maximizes path utilization.
  4. Packet forwarding and distribution: As VXLAN packets enter the transport network, the source UDP port guides their distribution across multiple redundant paths, ensuring efficient load balancing.

Result

The transport network can distinguish VXLAN flows by source UDP port and distribute them across ECMP paths, maximizing bandwidth utilization and minimizing congestion.