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In one aspect, the teachings herein provide point-to-point communication between all the virtual machines (VMs) belonging to the same tenant in a cloud-based virtual network environment without using any intermediate routing functions, and while providing full virtualization at the L2 and L3 levels. That is, the approach preserves completely isolated address spaces for each tenant at both L2 and L3 levels and supports multiple subnets for each tenant, and thereby allows tenants to define their own virtual networks without requiring the addition of expensive centralized routing and without requiring inter-subnet communications for the same tenant to traverse sub-optimal paths, as happens with software-based routers implemented in one of the VMs belonging to the tenant. Moreover, the methods and apparatuses taught herein provide a distributed solution for communicating between subnets belonging to the same …