Quick Answer
The answer is that VXLAN supports up to 16 million logical networks and encapsulates the original Layer 2 Ethernet frame inside a UDP packet. This is correct because VXLAN, or Virtual Extensible LAN, uses a 24-bit segment ID called the VNI (VXLAN Network Identifier), which provides 2^24 or roughly 16 million unique logical networks, far exceeding the 4096 VLAN limit. The encapsulation in UDP, typically on destination port 4789, allows the Layer 2 frame to be tunneled over a Layer 3 IP underlay, enabling scalable network virtualization without physical topology changes. On the Cisco DevNet Associate 200-901 exam, this tests your understanding of overlay networking and data center virtualization; a common trap is confusing VXLAN with VLAN or assuming it uses TCP instead of UDP. Remember the mnemonic: "VXLAN's 24-bit VNI gives 16 million networks, all wrapped in UDP for Layer 3 transport."
This 200-901 practice question tests your understanding of network fundamentals. Read the scenario carefully and evaluate each option against the stated constraints before committing to an answer. After answering, compare your reasoning against the explanation and wrong-answer breakdown below. Once you have made your selection, read the full explanation to reinforce the concept and understand why each distractor is designed to mislead on exam day.
Which TWO statements are true about VXLAN? (Choose two.)
VXLAN requires MPLS in the underlay
Why wrong: VXLAN can run over any IP network.
VXLAN encapsulates Ethernet frames in UDP packets
VXLAN uses UDP encapsulation.
VXLAN uses IP-in-IP encapsulation
Why wrong: VXLAN uses MAC-in-UDP.
VXLAN operates at Layer 2 only
Why wrong: VXLAN is an overlay over Layer 3.
VXLAN supports up to 16 million logical networks
24-bit VNI provides 16 million segments.
Answer choices
Answer the question above first, then reveal the full breakdown to understand why each option is right or wrong.
Correct answer & explanation
VXLAN encapsulates Ethernet frames in UDP packets
Option B is correct because VXLAN (Virtual Extensible LAN) encapsulates the original Layer 2 Ethernet frame inside a UDP packet (typically UDP destination port 4789). This allows the Layer 2 frame to be transported over a Layer 3 IP network, enabling network virtualization and overlay networking without requiring changes to the physical underlay.
Key principle: Answer the scenario, not the keyword: identify the specific constraint before choosing the most familiar-sounding option.
Answer analysis
For each option: why learners choose it and why it is or isn't the right answer here.
VXLAN requires MPLS in the underlay
Why it's wrong here
VXLAN can run over any IP network.
VXLAN encapsulates Ethernet frames in UDP packets
Why this is correct
VXLAN uses UDP encapsulation.
Related concept
Read the scenario before looking for a memorised answer.
VXLAN uses IP-in-IP encapsulation
Why it's wrong here
VXLAN uses MAC-in-UDP.
VXLAN operates at Layer 2 only
Why it's wrong here
VXLAN is an overlay over Layer 3.
VXLAN supports up to 16 million logical networks
Why this is correct
24-bit VNI provides 16 million segments.
Related concept
Read the scenario before looking for a memorised answer.
Common exam traps
Cisco often tests the misconception that VXLAN is a pure Layer 2 technology, but the trap here is that VXLAN encapsulates Layer 2 frames into Layer 3 UDP packets, making it a Layer 2 overlay over a Layer 3 underlay.
Detailed technical explanation
VXLAN uses a 24-bit VNI (VXLAN Network Identifier) in the header, allowing up to 16 million (2^24) logical networks, which is a massive scaling improvement over the 4096 VLANs supported by 802.1Q. The VTEP (VXLAN Tunnel Endpoint) performs the encapsulation and decapsulation, and the underlay network simply routes the UDP packets, making VXLAN highly compatible with existing IP fabrics. In real-world data center designs, VXLAN is often combined with EVPN (RFC 7432) for control-plane learning of MAC addresses and VNI mappings.
Key takeaway
Answer the scenario, not the keyword: identify the specific constraint before choosing the most familiar-sounding option.
Real-world example
A small business has 20 workstations on the 192.168.1.0/24 network and one public IP from its ISP. The router uses PAT (NAT overload) so all 20 devices share one public address using different source ports. NAT questions test whether you understand the four address terms and which direction each translation applies.
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FAQ
Network Fundamentals — This question tests Network Fundamentals — Read the scenario before looking for a memorised answer..
The correct answer is: VXLAN encapsulates Ethernet frames in UDP packets — Option B is correct because VXLAN (Virtual Extensible LAN) encapsulates the original Layer 2 Ethernet frame inside a UDP packet (typically UDP destination port 4789). This allows the Layer 2 frame to be transported over a Layer 3 IP network, enabling network virtualization and overlay networking without requiring changes to the physical underlay.
Identify which exam domain this question belongs to, review the core concept, then practise similar questions from the same domain.
Read the scenario before looking for a memorised answer.
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Courseiva creates original exam-style practice questions with explanations and wrong-answer analysis. It does not publish real exam questions, exam dumps, or protected exam content. Learn why practice questions differ from exam dumps →
Same concept, more angles
These questions test the same concept from different angles. Work through them to make sure you can recognise it however the exam phrases it.
Variation 1. A DevOps team is deploying a containerized application across multiple hosts. They need to ensure that traffic between containers on the same host is isolated from other tenants. Which network implementation best meets this requirement?
hardWhy C: VXLAN overlays with a distributed virtual switch provide Layer 2 isolation across multiple hosts by encapsulating Ethernet frames in UDP packets (RFC 7348). This creates independent virtual networks (VXLAN segments) that can span hosts, ensuring traffic between containers on the same host is isolated from other tenants without relying on physical network topology.
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Last reviewed: Jun 11, 2026
This 200-901 practice question is part of Courseiva's free Cisco certification practice question bank. Courseiva provides original exam-style practice questions with explanations, topic-based practice, mock exams, readiness tracking, and study analytics to help learners prepare for the 200-901 exam.
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