Virtual Extensible LAN (VXLAN) is a technology that enables the expansion of isolated vCloud architectures across Layer 2 domains beyond the limits imposed by the IEEE 802.1Q standard. By using a new MAC-in-UDP encapsulation technique, a VXLAN ID adds a 24-bit identifier, which allows networks to push beyond the IEEE 802.1Q limit to a possible 16 million logical networks.

While the conventional IEEE 802.1Q standards can perform the function, when trying to adhere to greater scalability demands VXLAN surpasses IEEE 802.1Q limitations by offering scalable capabilities of up to 16 million possible networks. Because of the scalable and flexible capabilities offered by VXLAN, the technology can be used in local or stretched datacenters with a single vCloud/vSphere management domain.