A storage router and related method are presented for combining multiple host frames, such as Fiber Channel frames, together into a single datagram for tunneling transmission over an IP or similar network. The storage router operates by storing incoming host frames in a host frame buffer. When there is sufficient data in the buffer, multiple host frames are batched together, compressed, and converted into an IP datagram. The number of host frames to be batched together can be established through a variety of tests, including total bytes of data, number of frames, or through a time-out mechanism. The network layer then fragments the datagram into data link level frames, such as 1500 byte Ethernet frames. When the datagram arrives at the final destination, the segmented datagram is reconstructed, decompressed, and the multiple host frames are then extracted and passed on to the recipient host frame network.