When a VTEP is configured as a Layer 3 gateway, traffic from an access VLAN port destined for an endpoint (that is reachable through a VXLAN tunnel on a different subnet) is routed by the VTEP.
In Routing into a Tunnel, Layer 3 traffic is sourced from 20.20.20.1 and is destined for 10.10.10.2. The gateway for H2 to reach 10.10.10.2 is VTEP A. When traffic ingresses VTEP A, it is routed, and since the neighbor entry for 10.10.10.2 indicates that it is reachable through VTEP B, VTEP A encapsulates traffic with VNI “Red” and sends it over the tunnel to VTEP B. At VTEP B, traffic is decapsulated and is Layer 2 forwarded to H3.
Routing traffic into tunnels is supported on ExtremeSwitching X465, X590, X695 series switches.