Performing logical network functionality within data compute nodes

A non-transitory machine readable medium storing a program executable by at least one processing unit of a first host machine, the program for implementing a first managed forwarding element (MFE) within a first data compute node (DCN) of a set of DCNs that execute on a virtualization application executing on the first host machine, the first MFE implementing a logical network that logically connects the first DCN to a plurality of other DCNs via a set of logical forwarding elements, the program comprising sets of instructions for:

• receiving a packet generated by a first application executing on the first DCN;
• performing logical network processing on the packet to determine that the packet is to be forwarded to a second DCN that is logically connected to the first DCN via the set of logical forwarding elements of the logical network;
• determining whether the second DCN executes on the first host machine or on a second, different host machine;
• when the second DCN executes on the first host machine, storing the received packet in a memory space of the first host machine that is shared between the first and second DCNs by (i) writing the packet to a first virtual memory page of the first DCN that maps to a particular physical memory page of the first host machine that is shared between the first and second DCNs and maps to a second virtual memory page of the second DCN and (ii) notifying the virtualization application executing on the first host machine that the packet is available in the particular physical memory page, wherein the virtualization application notifies a second MFE, operating within said second DCN to implement the logical network along with the first MFE, that the packet is stored in the particular physical memory page, wherein the second MFE reds the packet from the second virtual memory page of the second DCN, performs network processing on the packet, and provides the packet to a second application executing on the second DCN;
• and
• when the second DCN executes on a second, different host machine, encapsulating the received packet with a logical network encapsulation header and transmitting the encapsulated packet to a third MFE, operating on the second host machine to implement the logical network along with the first and second MFEs, via a physical network interface controller (PNIC) of the first host machine.