Method and system for virtual and physical network integration

For a physical device separate from sources and destinations of packets in a network, a method for implementing a gateway, the method comprising:

• receiving, from a physical host separate from the physical device implementing the gateway, a packet destined for a virtual machine residing in a remote broadcast domain that is different from a local broadcast domain in which the physical host resides;
• determining a logical network identifier for the received packet;
• encapsulating the received packet with the logical network identifier and a network layer header;
• and
• forwarding the encapsulated packet to an interconnecting network to which the physical device implementing the gateway connects, thereby allowing the packet to be transported to the virtual machine via the interconnecting network and allowing the remote broadcast domain and the local broadcast domain to be part of a common broadcast domain.

A non-transitory machine readable medium storing a program which when executed by a set of processing units of a physical device separate from sources and destinations of packets in a network implements a gateway, the program comprising sets of instructions for:

• receiving, from a physical host separate from the physical device implementing the gateway, a packet destined for a virtual machine residing in a remote broadcast domain that is different from a local broadcast domain in which the physical host resides;
• determining a logical network identifier for the received packet;
• encapsulating the received packet with the logical network identifier and a network layer header;
• and
• forwarding the encapsulated packet to an interconnecting network to which the physical device implementing the gateway connects, thereby allowing the packet to be transported to the virtual machine via the interconnecting network and allowing the remote broadcast domain and the local broadcast domain to be part of a common broadcast domain.