Some embodiments provide a system that includes several host machines for hosting several virtual machines and a physical network for interconnecting the host machines. Each host machine includes a managed physical switching element (MPSE) including several ports for performing link layer forwarding of packets to and from a set of virtual machines running on the host machine. Each port is associated with a unique media access control (MAC) address. Each host machine includes a managed routing element (MPRE) for receiving a data packet from a port of the MPSE and performing network layer routing in order to forward the received data packet from a first virtual machine of a first network segment to a second virtual machine of a second network segment.