Aspects of a method and system for networking are provided. In this regard, one or more circuits and/or processors in a network adapter of a first network device may determine whether to communicate traffic between virtual machines running on the first network device via a path that resides solely within the first network device, or via a path that comprises a second network device that is external to the first network device. The determination may be based, at least in part, on characteristics of the traffic. The determination may be based, at least in part, on capabilities and/or available resources of the network adapter. The determination may be based, at least in part, on management information exchanged between the one or more circuits and/or processors and one or more of: software running on the first network device, the second network device, and a third network device.