A method for application layer gateway (ALG) assisted local IP access (LIPA) at a base station by network address translation (NAT) allows IP capable UEs connected via HeNB or other kinds of Femto cell base station to use LIPA to establish multimedia session with other IP capable entities in the same IP network by NAT. The method relays a LIPA request to IMS, determines whether the terminating entity residing in the same IP network or not, and determines if the originating and terminating entities are allowed to use LIPA, and modifies the transport address information accordingly to facilitate signaling and packet routing. The method also provides the capability to apply different charging policies for LIPA and non-LIPA usages.