A network device may provide Layer-2 (L2) based tunneling to offload at least a portion of tunneling performed by tunneling gateways. The L2 based tunneling provided by the network device may comprise determining one or more other network devices that may receive traffic packets which may be handled by the tunneling gateways; and communicating at least a portion of the traffic packets to the one or more other network devices directly from the network device, using L2 tunnels established via the network device such that communication of the at least a portion of the one or more traffic packets offloads tunneling by bypassing the one or more tunneling gateways. At least a portion of the L2 based tunnel offloading by the network device may be handled via a network controller. Providing the offloaded tunneling in the network device may be based on determined of traffic type of the traffic packets.