Some embodiments provide a system that includes a first set of virtual machines belonging to a first overlay network and a second set of virtual machines belonging to a second overlay network. The first and second sets of virtual machines operate in several host machines, each of which includes a managed physical routing element (MPRE) for routing data packet between virtual machines in different overlay networks. A particular MPRE is configured as a bridge for routing packets between virtual machines that are in different overlay networks but in a same IP (internet protocol) subnet.