A method of optimizing network traffic includes, in part, measuring amounts of traffic exchange between each of a multitude of hosts disposed in the network, identifying a network domain to which each of the multitude of hosts is connected, calculating a net increase or decrease in inter-domain traffic associated with moving each of the multitude of hosts among the network domains in order to generate a list, and ranking the list of moves by net saving in the inter-domain traffic. The highest ranked move may be automatically applied so as to change the network domain to which the host associated with the highest ranked move is connected. The hosts may be virtual machines. Optionally, a change in the inter-domain traffic as a result of moving a first host in accordance with the list occurs only if one or more conditions are met.