350-401 Virtualization Practice Question
A network architect is evaluating VXLAN as the data plane encapsulation for a new data center fabric. Which two statements accurately describe how VXLAN operates? (Choose two.)
⚠ Common exam trap
The trap here is assuming VXLAN still depends on a flat Layer 2 underlay or a 12-bit segment identifier like traditional VLANs.
Answer choices
Why each option matters
Answer the question above first, then reveal the full breakdown to understand why each option is right or wrong.
Correct answer & explanation
✓
VXLAN encapsulates original Layer 2 frames inside UDP datagrams sent to destination port 4789.
VXLAN encapsulates original Layer 2 frames in UDP datagrams destined for port 4789 and identifies each logical segment with a 24-bit VNI supporting about 16 million segments. These two properties let the fabric scale far beyond VLAN limits while running over a routed Layer 3 underlay between distinct VTEP addresses.
Answer analysis
Option-by-option breakdown
For each option: why learners choose it and why it is or isn't the right answer here.
- ✗
VXLAN replaces the original Ethernet header with a new one and discards the original source MAC.
Why it's wrong here
VXLAN preserves the original inner Ethernet frame, including its source and destination MAC addresses, and adds an outer header for transport. Discarding the original source MAC would break Layer 2 forwarding semantics inside the VNI, so this statement is inaccurate.
- ✗
VXLAN tunnel endpoints must use the same IP address to form a tunnel.
Why it's wrong here
Each VTEP has its own unique IP address in the underlay, and tunnels are formed between distinct VTEP addresses. Sharing one IP address across VTEPs would make tunnel endpoints indistinguishable and routing impossible, so this statement does not describe VXLAN operation.
- ✓
VXLAN encapsulates original Layer 2 frames inside UDP datagrams sent to destination port 4789.
Why this is correct
VXLAN uses MAC-in-UDP encapsulation with the standard destination UDP port 4789. The original Ethernet frame is carried inside the UDP payload, allowing Layer 2 segments to be stretched across a Layer 3 underlay. This is a defining operational characteristic of VXLAN and is accurate for this fabric design.
- ✓
VXLAN uses a 24-bit VXLAN Network Identifier, allowing over 16 million logical segments.
Why this is correct
The VXLAN header contains a 24-bit VNI, which supports roughly 16 million unique Layer 2 segments. This scale is a primary reason VXLAN is chosen over VLANs, whose 12-bit VLAN ID limits deployments to about 4094 usable segments in a traditional data center fabric.
- ✗
VXLAN requires the underlay to be a single Layer 2 domain with no routing between VTEPs.
Why it's wrong here
VXLAN specifically enables Layer 2 extension over a Layer 3 underlay; routing between VTEPs is expected and normal. Claiming the underlay must be one flat Layer 2 domain contradicts the purpose of VXLAN and would eliminate its scalability benefits, so this statement is incorrect.
Visual reference
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Related to this question
Key term
VXLAN
VXLAN is a network overlay technology that encapsulates Layer 2 Ethernet frames in UDP packets to extend VLANs across Layer 3 networks.
Key term
Fabric Fundamentals
Fabric Fundamentals is the set of core concepts behind a network fabric, where switches and routers form a single logical system that simplifies traffic forwarding and automation.
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JA
Written and reviewed by Johnson Ajibi, MSc IT Security
Senior Network & Security Engineer · founder of Courseiva
Last reviewed September 2026 · checked against the official Cisco exam blueprint
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