Methods and apparatus for optimal participation of devices in a peer-to-peer overlay network. A method for dynamically configuring a node includes operating on an overlay network using a first participation mode, obtaining at least one configuration parameter, selecting a second participation mode for operation on the overlay network based on local policy and the at least one configuration parameter, and configuring the node to participate on the overlay network based on the second participation mode. An apparatus for dynamic node configuration includes a memory coupled to a processor and configured to operate on an overlay network using a first participation mode, obtain at least one configuration parameter, select a second participation mode for operation on the overlay network based on local policy and the at least one configuration parameter, and configure the node to participate on the overlay network based on the second participation mode.