Let’s start with an analogy – a busy airport. Thousands of passengers, dozens of terminals, countless gates. Now imagine trying to direct all that traffic – keeping passengers moving smoothly, without ending up at the wrong destination.

That’s what modern networks look like today: crowded, fast-paced, and constantly growing.

To manage this digital chaos, network engineers rely on segmentation—ways to divide and organize traffic, to avoid chaos. Two technologies that make this possible in the world of networks are VLANs and VXLANs. Imagine them as the traffic controllers of the network world, orchestrating who goes where and how data travel from point A to point B.

While VLANs have been here for decades, the demand created by cloud computing, virtualization, and multi-tenant environments showed us their time has come to be replaced. VXLANs – built for scale, flexibility, and the demands of today’s data centers.

Curious how VXLANs are implemented in open-source solutions like SONiC or FD.io? Reach out to us – we’ll be happy to explore your use case.

Both VLANs and VXLANs are often misunderstood or oversimplified. Let’s break them down, compare them, and look at where each one fits in real-world scenarios.

What is a VLAN?

Virtual Local Area Network is a method of logically separating network traffic, even if devices are physically on the same switch or infrastructure.

VLAN assigns a group of ports or devices to their own group – isolated from others, unless you explicitly allow communication between them. This is incredibly useful in office or enterprise environments, where different departments or tenants should not share broadcast domains. VLANs operate at Layer 2 (Data Link Layer) of the OSI model.

Pros:

Reduces broadcast traffic
Enhances security via segmentation
Easy to set up on managed switches

Cons:

VLAN IDs are limited to 4096, which may not be enough for large-scale multi-tenant environments.
VLANs are typically limited to a single Layer 2 domain, unless you involve complex bridging.

Trying to scale Layer 2 across a large network leads to more broadcast traffic, increased risk of loops, and the something known as spanning tree hell. Network teams will therefore spend more time troubleshooting than scaling and building.

What is a VXLAN?

Virtual Extensible LAN extends the concept of VLANs by allowing L2 networks to be overlaid on top of a L3 infrastructure, using tunneling.

VXLAN encapsulates Ethernet frames inside UDP packets, allowing them to traverse IP networks. It’s designed to address the scalability limitations of VLANs.

Simply put, VXLAN creates a virtual tunnel that allows data from the isolated groups (L2) to travel via the internet (L3) and extend their reach. Meaning, VXLANs operate at Layer 2 over Layer 3 (encapsulation).

Use cases for VXLAN usage include data center interconnects, cloud-scale networks, and multi-tenant environments.

Pros:

VXLAN Network Identifier (VNI): Instead of 4096 IDs, VXLAN supports up to 16 million (2^24) virtual networks
Works across distributed networks and hybrid cloud
Enables separation of tenant traffic across IP fabrics

Cons:

Requires additional configuration and often hardware/software support (e.g., VTEPs – VXLAN Tunnel Endpoints)
Higher complexity, compared to VLANs

Here at PANTHEON.tech, we love to support and empower new community efforts in networking, like SONiC. Make sure to follow our social media to know, where you can find us for live demos (SONiC + VPP in Action: VXLAN & BGP EVPN in Containerized Networks).

VLAN vs. VXLAN, side-by-side

Feature	VLAN	VXLAN

Protocol Layer	Layer 2	Layer 2 over Layer 3
ID Range	12-bit (4096 VLANs)	24-bit (16 million VNIs)
Scalability	Limited	Very high
Encapsulation	None (native Ethernet)	UDP-based encapsulation
Use Case	Office LANs, small networks	Cloud DCs, multi-tenant networks
Interoperability	Basic switching	Requires VTEPs and IP fabric

Real-World Usage

VLAN: Enterprises and campus networks

Most enterprise networks still rely on VLANs for segmenting traffic between departments. They’re easy to deploy and maintain. A simple Layer 3 switch and managed VLAN setup keeps traffic segmented and secure.

VXLAN: Data centers and cloud environments

VXLANs excel in modern data centers, especially when combined with EVPN as the control plane. VXLANs allow virtual machines or containers to move across physical servers and even geographic locations while maintaining the same network identity.

The choice is yours

VLANs are here to stay. They’re still highly effective for straightforward segmentation. But for modern, cloud-native, and large-scale networks, VXLAN is becoming the new standard.

Understanding the difference and knowing when to use each is a must for any network engineer building future-proof infrastructure.

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