Which statement defines underlay and overlay networks?

• A. Underlay is the physical network; overlay is a virtual network carried atop it (VXLAN/GRE).
• B. The overlay is the physical IP network; the underlay is a virtual network carried on top.
• C. Overlay is for management only.
• D. Underlay and overlay are two names for the same network.

Answer: (A)

The concept here is the separation between the physical transport network and the virtual networks that ride on top of it. The underlay is the actual physical network—the switches, routers, and links that provide the real IP connectivity and routing. The overlay is a virtual network built atop that physical fabric, created by tunneling protocols like VXLAN or GRE to connect endpoints across the underlay while offering logical segmentation and multitenancy. This arrangement lets many separate networks share one physical infrastructure, with the overlay handling the logical topology and addressing while the underlay handles actual data transport and path decisions. For example, VXLAN wraps Layer 2 frames in a UDP tunnel so multiple isolated networks can span a single IP-based fabric.

Opposing statements would mischaracterize the roles: the overlay is not the physical network, and overlays aren’t limited to management traffic—they carry tenant data as well. And underlay and overlay are not two names for the same network.