diff --git a/ovn/controller/binding.c b/ovn/controller/binding.c
index 404f0e7..e9461ef 100644
--- a/ovn/controller/binding.c
+++ b/ovn/controller/binding.c
@@ -159,13 +159,11 @@ add_local_datapath__(struct ovsdb_idl_index *sbrec_datapath_binding_by_key,
                                          sbrec_port_binding_by_name,
                                          peer->datapath, false,
                                          depth + 1, local_datapaths);
-                    ld->n_peer_dps++;
-                    ld->peer_dps = xrealloc(
-                            ld->peer_dps,
-                            ld->n_peer_dps * sizeof *ld->peer_dps);
-                    ld->peer_dps[ld->n_peer_dps - 1] = datapath_lookup_by_key(
-                        sbrec_datapath_binding_by_key,
-                        peer->datapath->tunnel_key);
+                    ld->n_peer_ports++;
+                    ld->peer_ports = xrealloc(ld->peer_ports,
+                                              ld->n_peer_ports *
+                                              sizeof *ld->peer_ports);
+                    ld->peer_ports[ld->n_peer_ports - 1] = peer;
                 }
             }
         }
diff --git a/ovn/controller/chassis.c b/ovn/controller/chassis.c
index 0f537f1..8403212 100644
--- a/ovn/controller/chassis.c
+++ b/ovn/controller/chassis.c
@@ -23,6 +23,7 @@
 #include "lib/vswitch-idl.h"
 #include "openvswitch/dynamic-string.h"
 #include "openvswitch/vlog.h"
+#include "openvswitch/ofp-parse.h"
 #include "ovn/lib/chassis-index.h"
 #include "ovn/lib/ovn-sb-idl.h"
 #include "ovn-controller.h"
@@ -69,6 +70,12 @@ get_bridge_mappings(const struct smap *ext_ids)
 }
 
 static const char *
+get_chassis_mac_mappings(const struct smap *ext_ids)
+{
+    return smap_get_def(ext_ids, "ovn-chassis-mac-mappings", "");
+}
+
+static const char *
 get_cms_options(const struct smap *ext_ids)
 {
     return smap_get_def(ext_ids, "ovn-cms-options", "");
@@ -162,6 +169,7 @@ chassis_run(struct ovsdb_idl_txn *ovnsb_idl_txn,
     const char *datapath_type =
         br_int && br_int->datapath_type ? br_int->datapath_type : "";
     const char *cms_options = get_cms_options(&cfg->external_ids);
+    const char *chassis_macs = get_chassis_mac_mappings(&cfg->external_ids);
 
     struct ds iface_types = DS_EMPTY_INITIALIZER;
     ds_put_cstr(&iface_types, "");
@@ -190,18 +198,22 @@ chassis_run(struct ovsdb_idl_txn *ovnsb_idl_txn,
             = smap_get_def(&chassis_rec->external_ids, "iface-types", "");
         const char *chassis_cms_options
             = get_cms_options(&chassis_rec->external_ids);
+        const char *chassis_mac_mappings
+            = get_chassis_mac_mappings(&chassis_rec->external_ids);
 
         /* If any of the external-ids should change, update them. */
         if (strcmp(bridge_mappings, chassis_bridge_mappings) ||
             strcmp(datapath_type, chassis_datapath_type) ||
             strcmp(iface_types_str, chassis_iface_types) ||
-            strcmp(cms_options, chassis_cms_options)) {
+            strcmp(cms_options, chassis_cms_options) ||
+            strcmp(chassis_macs, chassis_mac_mappings)) {
             struct smap new_ids;
             smap_clone(&new_ids, &chassis_rec->external_ids);
             smap_replace(&new_ids, "ovn-bridge-mappings", bridge_mappings);
             smap_replace(&new_ids, "datapath-type", datapath_type);
             smap_replace(&new_ids, "iface-types", iface_types_str);
             smap_replace(&new_ids, "ovn-cms-options", cms_options);
+            smap_replace(&new_ids, "ovn-chassis-mac-mappings", chassis_macs);
             sbrec_chassis_verify_external_ids(chassis_rec);
             sbrec_chassis_set_external_ids(chassis_rec, &new_ids);
             smap_destroy(&new_ids);
@@ -319,6 +331,56 @@ chassis_run(struct ovsdb_idl_txn *ovnsb_idl_txn,
     return chassis_rec;
 }
 
+bool
+chassis_get_mac(const struct sbrec_chassis *chassis_rec,
+                const char *bridge_mapping,
+                struct eth_addr *chassis_mac)
+{
+    const char *tokens
+        = get_chassis_mac_mappings(&chassis_rec->external_ids);
+
+    if (!strlen(tokens)) {
+       return false;
+    }
+
+    char *save_ptr = NULL;
+    char *token;
+    bool ret = false;
+    char *tokstr = xstrdup(tokens);
+
+    /* Format for a chassis mac configuration is:
+     * ovn-chassis-mac-mappings="bridge-name1:MAC1,bridge-name2:MAC2"
+     */
+    for (token = strtok_r(tokstr, ",", &save_ptr);
+         token != NULL;
+         token = strtok_r(NULL, ",", &save_ptr)) {
+        char *save_ptr2 = NULL;
+        char *chassis_mac_bridge = strtok_r(token, ":", &save_ptr2);
+        char *chassis_mac_str = strtok_r(NULL, "", &save_ptr2);
+
+        if (!strcmp(chassis_mac_bridge, bridge_mapping)) {
+            struct eth_addr temp_mac;
+            char *err_str = NULL;
+
+            ret = true;
+
+            /* Return the first chassis mac. */
+            if ((err_str = str_to_mac(chassis_mac_str, &temp_mac))) {
+                free(err_str);
+                ret = false;
+                continue;
+            }
+
+            *chassis_mac = temp_mac;
+            break;
+        }
+    }
+
+    free(tokstr);
+
+    return ret;
+}
+
 /* Returns true if the database is all cleaned up, false if more work is
  * required. */
 bool
diff --git a/ovn/controller/chassis.h b/ovn/controller/chassis.h
index 9847e19..e3fbc31 100644
--- a/ovn/controller/chassis.h
+++ b/ovn/controller/chassis.h
@@ -26,6 +26,7 @@ struct ovsrec_open_vswitch_table;
 struct sbrec_chassis;
 struct sbrec_chassis_table;
 struct sset;
+struct eth_addr;
 
 void chassis_register_ovs_idl(struct ovsdb_idl *);
 const struct sbrec_chassis *chassis_run(
@@ -36,5 +37,8 @@ const struct sbrec_chassis *chassis_run(
     const struct sset *transport_zones);
 bool chassis_cleanup(struct ovsdb_idl_txn *ovnsb_idl_txn,
                      const struct sbrec_chassis *);
+bool chassis_get_mac(const struct sbrec_chassis *chassis,
+                     const char *bridge_mapping,
+                     struct eth_addr *chassis_mac);
 
 #endif /* ovn/chassis.h */
diff --git a/ovn/controller/ovn-controller.8.xml b/ovn/controller/ovn-controller.8.xml
index 9721d9a..18f66fe 100644
--- a/ovn/controller/ovn-controller.8.xml
+++ b/ovn/controller/ovn-controller.8.xml
@@ -182,6 +182,16 @@
           transport zone.
         </p>
       </dd>
+      <dt><code>external_ids:ovn-chassis-mac-mappings</code></dt>
+      <dd>
+        A list of key-value pairs that map a chassis specific mac to
+        a physical network name. An example
+        value mapping two chassis macs to two physical network names would be:
+        <code>physnet1:aa:bb:cc:dd:ee:ff,physnet2:a1:b2:c3:d4:e5:f6</code>.
+        These are the macs that ovn-controller will replace a router port
+        mac with, if packet is going from a distributed router port on
+        vlan type logical switch.
+      </dd>
     </dl>
 
     <p>
diff --git a/ovn/controller/ovn-controller.c b/ovn/controller/ovn-controller.c
index 69eeee5..90b2d57 100644
--- a/ovn/controller/ovn-controller.c
+++ b/ovn/controller/ovn-controller.c
@@ -867,7 +867,7 @@ main(int argc, char *argv[])
             struct local_datapath *cur_node, *next_node;
             HMAP_FOR_EACH_SAFE (cur_node, next_node, hmap_node,
                                 &local_datapaths) {
-                free(cur_node->peer_dps);
+                free(cur_node->peer_ports);
                 hmap_remove(&local_datapaths, &cur_node->hmap_node);
                 free(cur_node);
             }
diff --git a/ovn/controller/ovn-controller.h b/ovn/controller/ovn-controller.h
index 6afd727..a4c1309 100644
--- a/ovn/controller/ovn-controller.h
+++ b/ovn/controller/ovn-controller.h
@@ -59,8 +59,9 @@ struct local_datapath {
     /* True if this datapath contains an l3gateway port located on this
      * hypervisor. */
     bool has_local_l3gateway;
-    const struct sbrec_datapath_binding **peer_dps;
-    size_t n_peer_dps;
+
+    const struct sbrec_port_binding **peer_ports;
+    size_t n_peer_ports;
 };
 
 struct local_datapath *get_local_datapath(const struct hmap *,
diff --git a/ovn/controller/physical.c b/ovn/controller/physical.c
index 7386404..fb4aaa0 100644
--- a/ovn/controller/physical.c
+++ b/ovn/controller/physical.c
@@ -20,6 +20,7 @@
 #include "ha-chassis.h"
 #include "lflow.h"
 #include "lport.h"
+#include "chassis.h"
 #include "lib/bundle.h"
 #include "openvswitch/poll-loop.h"
 #include "lib/uuid.h"
@@ -30,6 +31,7 @@
 #include "openvswitch/ofp-actions.h"
 #include "openvswitch/ofpbuf.h"
 #include "openvswitch/vlog.h"
+#include "openvswitch/ofp-parse.h"
 #include "ovn-controller.h"
 #include "ovn/lib/chassis-index.h"
 #include "ovn/lib/ovn-sb-idl.h"
@@ -233,6 +235,92 @@ get_zone_ids(const struct sbrec_port_binding *binding,
 }
 
 static void
+put_replace_router_port_mac_flows(const struct
+                                  sbrec_port_binding *localnet_port,
+                                  const struct sbrec_chassis *chassis,
+                                  const struct hmap *local_datapaths,
+                                  struct ofpbuf *ofpacts_p,
+                                  ofp_port_t ofport,
+                                  struct hmap *flow_table)
+{
+    struct local_datapath *ld = get_local_datapath(local_datapaths,
+                                                   localnet_port->datapath->
+                                                   tunnel_key);
+    ovs_assert(ld);
+
+    uint32_t dp_key = localnet_port->datapath->tunnel_key;
+    uint32_t port_key = localnet_port->tunnel_key;
+    int tag = localnet_port->tag ? *localnet_port->tag : 0;
+    const char *network = smap_get(&localnet_port->options, "network_name");
+    struct eth_addr chassis_mac;
+
+    if (!network) {
+        static struct vlog_rate_limit rl = VLOG_RATE_LIMIT_INIT(1, 1);
+        VLOG_WARN_RL(&rl, "Physical network not configured for datapath: %ld "
+                     "with localnet port",
+                     localnet_port->datapath->tunnel_key);
+        return;
+    }
+
+    /* Get chassis mac */
+    if (!chassis_get_mac(chassis, network, &chassis_mac)) {
+        static struct vlog_rate_limit rl = VLOG_RATE_LIMIT_INIT(1, 1);
+        /* Keeping the log level low for backward compatibility.
+         * Chassis mac is a new configuration.
+         */
+        VLOG_DBG_RL(&rl, "Could not get chassis mac for network: %s", network);
+        return;
+    }
+
+    for (int i = 0; i < ld->n_peer_ports; i++) {
+        const struct sbrec_port_binding *rport_binding = ld->peer_ports[i];
+        struct eth_addr router_port_mac;
+        char *err_str = NULL;
+        struct match match;
+        struct ofpact_mac *replace_mac;
+
+        /* Table 65, priority 150.
+         * =======================
+         *
+         * Implements output to localnet port.
+         * a. Flow replaces ingress router port mac with a chassis mac.
+         * b. Flow appends the vlan id localnet port is configured with.
+         */
+        match_init_catchall(&match);
+        ofpbuf_clear(ofpacts_p);
+
+        ovs_assert(rport_binding->n_mac == 1);
+        if ((err_str = str_to_mac(rport_binding->mac[0], &router_port_mac))) {
+            /* Parsing of mac failed. */
+            VLOG_WARN("Parsing or router port mac failed for router port: %s, "
+                      "with error: %s", rport_binding->logical_port, err_str);
+            free(err_str);
+            return;
+        }
+
+        /* Replace Router mac flow */
+        match_set_metadata(&match, htonll(dp_key));
+        match_set_reg(&match, MFF_LOG_OUTPORT - MFF_REG0, port_key);
+        match_set_dl_src(&match, router_port_mac);
+
+        replace_mac = ofpact_put_SET_ETH_SRC(ofpacts_p);
+        replace_mac->mac = chassis_mac;
+
+        if (tag) {
+            struct ofpact_vlan_vid *vlan_vid;
+            vlan_vid = ofpact_put_SET_VLAN_VID(ofpacts_p);
+            vlan_vid->vlan_vid = tag;
+            vlan_vid->push_vlan_if_needed = true;
+        }
+
+        ofpact_put_OUTPUT(ofpacts_p)->port = ofport;
+
+        ofctrl_add_flow(flow_table, OFTABLE_LOG_TO_PHY, 150, 0,
+                        &match, ofpacts_p);
+    }
+}
+
+static void
 put_local_common_flows(uint32_t dp_key, uint32_t port_key,
                        uint32_t parent_port_key,
                        const struct zone_ids *zone_ids,
@@ -701,6 +789,13 @@ consider_port_binding(struct ovsdb_idl_index *sbrec_port_binding_by_name,
         }
         ofctrl_add_flow(flow_table, OFTABLE_LOG_TO_PHY, 100, 0,
                         &match, ofpacts_p);
+
+        if (!strcmp(binding->type, "localnet")) {
+            put_replace_router_port_mac_flows(binding, chassis,
+                                              local_datapaths, ofpacts_p,
+                                              ofport, flow_table);
+        }
+
     } else if (!tun && !is_ha_remote) {
         /* Remote port connected by localnet port */
         /* Table 33, priority 100.
diff --git a/ovn/northd/ovn-northd.c b/ovn/northd/ovn-northd.c
index de0c06d..74d3692 100644
--- a/ovn/northd/ovn-northd.c
+++ b/ovn/northd/ovn-northd.c
@@ -86,6 +86,12 @@ enum ovn_datapath_type {
     DP_ROUTER                   /* OVN logical router. */
 };
 
+/* Network type of a datapath */
+enum ovn_datapath_nw_type {
+    DP_NETWORK_OVERLAY,
+    DP_NETWORK_BRIDGED
+};
+
 /* Returns an "enum ovn_stage" built from the arguments.
  *
  * (It's better to use ovn_stage_build() for type-safety reasons, but inline
@@ -445,6 +451,8 @@ struct ovn_datapath {
 
     bool has_unknown;
 
+    enum ovn_datapath_nw_type network_type;
+
     /* IPAM data. */
     struct ipam_info ipam_info;
 
@@ -491,6 +499,27 @@ cleanup_macam(struct hmap *macam_)
     }
 }
 
+static void
+ovn_datapath_update_nw_type(struct ovn_datapath *od)
+{
+    if (!od->nbs) {
+        return;
+    }
+
+    if (!od->nbs->network_type ||
+        !strlen(od->nbs->network_type) ||
+        !strcmp(od->nbs->network_type, "overlay")) {
+        /* No value in network_type is taken as OVERLAY. */
+        od->network_type = DP_NETWORK_OVERLAY;
+    } else if (!strcmp(od->nbs->network_type, "bridged")) {
+        od->network_type = DP_NETWORK_BRIDGED;
+    } else {
+        static struct vlog_rate_limit rl = VLOG_RATE_LIMIT_INIT(5, 1);
+        VLOG_WARN_RL(&rl, "bad network type %s, for %s",
+                     od->nbs->network_type, od->nbs->name);
+    }
+}
+
 static struct ovn_datapath *
 ovn_datapath_create(struct hmap *datapaths, const struct uuid *key,
                     const struct nbrec_logical_switch *nbs,
@@ -682,6 +711,13 @@ ovn_datapath_update_external_ids(struct ovn_datapath *od)
     if (name2 && name2[0]) {
         smap_add(&ids, "name2", name2);
     }
+
+    if (od->nbs) {
+        smap_add(&ids, "network-type",
+                 (od->nbs->network_type && strlen(od->nbs->network_type)) ?
+                 od->nbs->network_type : "overlay");
+    }
+
     sbrec_datapath_binding_set_external_ids(od->sb, &ids);
     smap_destroy(&ids);
 }
@@ -734,9 +770,11 @@ join_datapaths(struct northd_context *ctx, struct hmap *datapaths,
             ovs_list_remove(&od->list);
             ovs_list_push_back(both, &od->list);
             ovn_datapath_update_external_ids(od);
+            ovn_datapath_update_nw_type(od);
         } else {
             od = ovn_datapath_create(datapaths, &nbs->header_.uuid,
                                      nbs, NULL, NULL);
+            ovn_datapath_update_nw_type(od);
             ovs_list_push_back(nb_only, &od->list);
         }
 
diff --git a/ovn/ovn-architecture.7.xml b/ovn/ovn-architecture.7.xml
index 8c9e106..6275db1 100644
--- a/ovn/ovn-architecture.7.xml
+++ b/ovn/ovn-architecture.7.xml
@@ -1407,6 +1407,30 @@
       egress pipeline of the destination localnet logical switch datapath
       and goes out of the integration bridge to the provider bridge (
       belonging to the destination logical switch) via the localnet port.
+      While sending the packet to provider bridge, we also replace router
+      port mac as source mac with a chassis unique mac.
+
+      This chassis unique mac is configured as global ovs config on each
+      chassis (eg. via "<code>ovs-vsctl set open . external-ids:
+      ovn-chassis-mac-mappings="phys:aa:bb:cc:dd:ee:$i$i"</code>").More
+      details on this config are present in <code>ovn-controller</code>(8).
+
+      If the above is not configured, then source mac would be the router
+      port mac. This could create problem if we have more than one chassis.
+      This is because, since the router port is distributed, hence same
+      mac,vlan tuple will seen by physical network from other chassis
+      as well. This could cause some/all of these issues:
+      <ul>
+        <li>
+          Continous mac moves in top of the rack switch (TOR).
+        </li>
+        <li>
+          TOR dropping the traffic, which is causing continous mac moves.
+        </li>
+        <li>
+          TOR blocking the ports from which mac moves are happening.
+        </li>
+      </ul>
     </li>
 
     <li>
diff --git a/ovn/ovn-nb.ovsschema b/ovn/ovn-nb.ovsschema
index 2c87cbb..09df854 100644
--- a/ovn/ovn-nb.ovsschema
+++ b/ovn/ovn-nb.ovsschema
@@ -1,7 +1,7 @@
 {
     "name": "OVN_Northbound",
-    "version": "5.16.0",
-    "cksum": "923459061 23095",
+    "version": "5.17.0",
+    "cksum": "1251608309 23487",
     "tables": {
         "NB_Global": {
             "columns": {
@@ -29,6 +29,12 @@
         "Logical_Switch": {
             "columns": {
                 "name": {"type": "string"},
+                "network_type": {"type": {"key": {"type": "string",
+                                                  "enum": ["set", ["overlay",
+                                                                   "bridged"]
+                                                          ]},
+                                          "min": 0,
+                                          "max": 1}},
                 "ports": {"type": {"key": {"type": "uuid",
                                            "refTable": "Logical_Switch_Port",
                                            "refType": "strong"},
diff --git a/ovn/ovn-nb.xml b/ovn/ovn-nb.xml
index cbaa949..0fa406a 100644
--- a/ovn/ovn-nb.xml
+++ b/ovn/ovn-nb.xml
@@ -158,6 +158,25 @@
       </p>
     </column>
 
+    <column name="network_type">
+      <p>
+        Whether logical switch will fully virtualize the network (i.e overlay)
+        or it simply connects to the physical network (i.e bridged).
+        This field will take either of the following values: "overlay" or
+        "bridged".
+      </p>
+
+      <p>
+        An "overlay" type logical switch means that 24 bit virtual network
+        identifier defines its broadcast domain and hence packets leaving
+        the chassis will be encapsulated. A "bridged" logical switch means that
+        it uses 12 bit vlan id as broadcast domain and packets leaving the
+        chassis would not be encapsulated, but would have a vlan header
+        instead (logical switches with vlan zero are also to be assigned the
+        type as "bridged"). For a "bridged" type logical switch, a localnet
+        port MUST be created.
+      </p>
+    </column>
     <column name="load_balancer">
       Load balance a virtual ip address to a set of logical port endpoint
       ip addresses.
diff --git a/ovn/ovn-sb.xml b/ovn/ovn-sb.xml
index 1a2bc1d..74498c6 100644
--- a/ovn/ovn-sb.xml
+++ b/ovn/ovn-sb.xml
@@ -301,6 +301,14 @@
       See <code>ovn-controller</code>(8) for more information.
     </column>
 
+    <column name="external_ids" key="ovn-chassis-mac-mappings">
+      <code>ovn-controller</code> populates this key with the set of options
+      configured in the <ref table="Open_vSwitch"
+      column="external_ids:ovn-chassis-mac-mappings"/> column of the
+      Open_vSwitch database's <ref table="Open_vSwitch" db="Open_vSwitch"/>
+      table. See <code>ovn-controller</code>(8) for more information.
+    </column>
+
     <group title="Common Columns">
       The overall purpose of these columns is described under <code>Common
       Columns</code> at the beginning of this document.
@@ -2162,6 +2170,13 @@ tcp.flags = RST;
         the <ref db="OVN_Northbound"/> database.
       </column>
 
+      <column name="external_ids" key="logical-switch-type">
+        For a logical datapath that represents a logical switch,
+        <code>ovn-northd</code> stores in this key the network type from
+        corresponding <ref table="Logical_Switch" db="OVN_Northbound"/> row in
+        the <ref db="OVN_Northbound"/> database.
+      </column>
+
       <group title="Naming">
         <p>
           <code>ovn-northd</code> copies these from the name fields in the <ref
diff --git a/ovn/utilities/ovn-nbctl.c b/ovn/utilities/ovn-nbctl.c
index e86ab7f..3f4f215 100644
--- a/ovn/utilities/ovn-nbctl.c
+++ b/ovn/utilities/ovn-nbctl.c
@@ -572,7 +572,8 @@ General commands:\n\
   show ROUTER               print overview of database contents for ROUTER\n\
 \n\
 Logical switch commands:\n\
-  ls-add [SWITCH]           create a logical switch named SWITCH\n\
+  ls-add [SWITCH] [TYPE]    create a logical switch named SWITCH of TYPE \n\
+                            bridged or overlay\n\
   ls-del SWITCH             delete SWITCH and all its ports\n\
   ls-list                   print the names of all logical switches\n\
 \n\
@@ -1013,8 +1014,10 @@ print_lr(const struct nbrec_logical_router *lr, struct ds *s)
 static void
 print_ls(const struct nbrec_logical_switch *ls, struct ds *s)
 {
-    ds_put_format(s, "switch "UUID_FMT" (%s)",
-                  UUID_ARGS(&ls->header_.uuid), ls->name);
+    ds_put_format(s, "switch "UUID_FMT" (%s) (type: %s)",
+                  UUID_ARGS(&ls->header_.uuid), ls->name,
+                  ls->network_type && strlen(ls->network_type) ?
+                  ls->network_type : "overlay");
     print_alias(&ls->external_ids, "neutron:network_name", s);
     ds_put_char(s, '\n');
 
@@ -1116,7 +1119,8 @@ nbctl_show(struct ctl_context *ctx)
 static void
 nbctl_ls_add(struct ctl_context *ctx)
 {
-    const char *ls_name = ctx->argc == 2 ? ctx->argv[1] : NULL;
+    const char *ls_name = ctx->argc >= 2 ? ctx->argv[1] : NULL;
+    const char *nw_type = ctx->argc == 3 ? ctx->argv[2] : NULL;
 
     bool may_exist = shash_find(&ctx->options, "--may-exist") != NULL;
     bool add_duplicate = shash_find(&ctx->options, "--add-duplicate") != NULL;
@@ -1153,6 +1157,33 @@ nbctl_ls_add(struct ctl_context *ctx)
     if (ls_name) {
         nbrec_logical_switch_set_name(ls, ls_name);
     }
+
+    if (nw_type) {
+        nbrec_logical_switch_set_network_type(ls, nw_type);
+    }
+}
+
+static void
+nbctl_ls_set_network_type(struct ctl_context *ctx)
+{
+    const char *ls_name = ctx->argv[1];
+    const char *ls_type = ctx->argv[2];
+    const struct nbrec_logical_switch *ls = NULL;
+
+    char *error = ls_by_name_or_uuid(ctx, ls_name, true, &ls);
+
+    if (!ls || error) {
+        ctx->error = error;
+        return;
+    }
+
+    if (strcmp(ls_type, "bridged") && strcmp(ls_type, "overlay")) {
+        ctl_error(ctx, "Invalid type: \"%s\", supported types are \"bridged\" "
+                  "and \"overlay\"", ls_type);
+        return;
+    }
+
+    nbrec_logical_switch_set_network_type(ls, ls_type);
 }
 
 static void
@@ -1182,8 +1213,10 @@ nbctl_ls_list(struct ctl_context *ctx)
 
     smap_init(&switches);
     NBREC_LOGICAL_SWITCH_FOR_EACH(ls, ctx->idl) {
-        smap_add_format(&switches, ls->name, UUID_FMT " (%s)",
-                        UUID_ARGS(&ls->header_.uuid), ls->name);
+        smap_add_format(&switches, ls->name, UUID_FMT " (%s) (type: %s)",
+                        UUID_ARGS(&ls->header_.uuid), ls->name,
+                        ls->network_type && strlen(ls->network_type) ?
+                        ls->network_type : "overlay");
     }
     const struct smap_node **nodes = smap_sort(&switches);
     for (size_t i = 0; i < smap_count(&switches); i++) {
@@ -5504,10 +5537,12 @@ static const struct ctl_command_syntax nbctl_commands[] = {
     { "show", 0, 1, "[SWITCH]", NULL, nbctl_show, NULL, "", RO },
 
     /* logical switch commands. */
-    { "ls-add", 0, 1, "[SWITCH]", NULL, nbctl_ls_add, NULL,
+    { "ls-add", 0, 2, "[SWITCH] [TYPE]", NULL, nbctl_ls_add, NULL,
       "--may-exist,--add-duplicate", RW },
     { "ls-del", 1, 1, "SWITCH", NULL, nbctl_ls_del, NULL, "--if-exists", RW },
     { "ls-list", 0, 0, "", NULL, nbctl_ls_list, NULL, "", RO },
+    { "ls-set-network-type", 2, 2, "SWITCH TYPE", NULL,
+      nbctl_ls_set_network_type, NULL, "", RW },
 
     /* acl commands. */
     { "acl-add", 5, 6, "{SWITCH | PORTGROUP} DIRECTION PRIORITY MATCH ACTION",
diff --git a/tests/ovn-nbctl.at b/tests/ovn-nbctl.at
index 18c5c1d..457d6fd 100644
--- a/tests/ovn-nbctl.at
+++ b/tests/ovn-nbctl.at
@@ -56,31 +56,39 @@ m4_define([OVN_NBCTL_TEST],
 OVN_NBCTL_TEST([ovn_nbctl_basic_switch], [basic switch commands], [
 AT_CHECK([ovn-nbctl ls-add ls0])
 AT_CHECK([ovn-nbctl ls-list | uuidfilt], [0], [dnl
-<0> (ls0)
+<0> (ls0) (type: overlay)
 ])
 
 AT_CHECK([ovn-nbctl ls-add ls1])
 AT_CHECK([ovn-nbctl ls-list | uuidfilt], [0], [dnl
-<0> (ls0)
-<1> (ls1)
+<0> (ls0) (type: overlay)
+<1> (ls1) (type: overlay)
+])
+
+AT_CHECK([ovn-nbctl ls-add ls2 bridged])
+AT_CHECK([ovn-nbctl ls-list | uuidfilt], [0], [dnl
+<0> (ls0) (type: overlay)
+<1> (ls1) (type: overlay)
+<2> (ls2) (type: bridged)
 ])
 
+AT_CHECK([ovn-nbctl ls-del ls2])
 AT_CHECK([ovn-nbctl ls-del ls0])
 AT_CHECK([ovn-nbctl ls-list | uuidfilt], [0], [dnl
-<0> (ls1)
+<0> (ls1) (type: overlay)
 ])
 
 AT_CHECK([ovn-nbctl show ls0])
 AT_CHECK([ovn-nbctl ls-add ls0])
 AT_CHECK([ovn-nbctl show ls0 | uuidfilt], [0],
-  [switch <0> (ls0)
+  [switch <0> (ls0) (type: overlay)
 ])
 AT_CHECK([ovn-nbctl ls-add ls0], [1], [],
   [ovn-nbctl: ls0: a switch with this name already exists
 ])
 AT_CHECK([ovn-nbctl --may-exist ls-add ls0])
 AT_CHECK([ovn-nbctl show ls0 | uuidfilt], [0],
-  [switch <0> (ls0)
+  [switch <0> (ls0) (type: overlay)
 ])
 AT_CHECK([ovn-nbctl --add-duplicate ls-add ls0])
 AT_CHECK([ovn-nbctl --may-exist --add-duplicate ls-add ls0], [1], [],
@@ -102,7 +110,23 @@ AT_CHECK([ovn-nbctl --add-duplicate ls-add], [1], [],
 ])
 AT_CHECK([ovn-nbctl --may-exist ls-add], [1], [],
   [ovn-nbctl: --may-exist requires specifying a name
-])])
+])
+
+AT_CHECK([ovn-nbctl ls-set-network-type ls1 bridged])
+AT_CHECK([ovn-nbctl show ls1 | uuidfilt], [0],
+  [switch <0> (ls1) (type: bridged)
+])
+
+AT_CHECK([ovn-nbctl ls-set-network-type ls1 overlay])
+AT_CHECK([ovn-nbctl show ls1 | uuidfilt], [0],
+  [switch <0> (ls1) (type: overlay)
+])
+
+AT_CHECK([ovn-nbctl ls-set-network-type ls1 temp], [1], [],
+  [ovn-nbctl: Invalid type: "temp", supported types are "bridged" and "overlay"
+])
+
+])
 
 dnl ---------------------------------------------------------------------
 
@@ -1490,7 +1514,7 @@ dnl ---------------------------------------------------------------------
 OVN_NBCTL_TEST([ovn_nbctl_dry_run_mode], [dry run mode], [
 dnl Check that dry run has no permanent effect.
 AT_CHECK([ovn-nbctl --dry-run ls-add ls0 -- ls-list | uuidfilt], [0], [dnl
-<0> (ls0)
+<0> (ls0) (type: overlay)
 ])
 AT_CHECK([ovn-nbctl ls-list | uuidfilt], [0], [dnl
 ])
@@ -1498,7 +1522,7 @@ AT_CHECK([ovn-nbctl ls-list | uuidfilt], [0], [dnl
 dnl Check that dry-run mode is not sticky.
 AT_CHECK([ovn-nbctl ls-add ls0])
 AT_CHECK([ovn-nbctl ls-list | uuidfilt], [0], [dnl
-<0> (ls0)
+<0> (ls0) (type: overlay)
 ])])
 
 dnl ---------------------------------------------------------------------
@@ -1508,13 +1532,13 @@ AT_CHECK([ovn-nbctl ls-add ls0 -- ls-add ls1])
 
 dnl Expect one line for one command.
 AT_CHECK([ovn-nbctl --oneline ls-list | uuidfilt], [0], [dnl
-<0> (ls0)\n<1> (ls1)
+<0> (ls0) (type: overlay)\n<1> (ls1) (type: overlay)
 ])
 
 dnl Expect lines for two commands.
 AT_CHECK([ovn-nbctl --oneline ls-list -- ls-list | uuidfilt], [0], [dnl
-<0> (ls0)\n<1> (ls1)
-<0> (ls0)\n<1> (ls1)
+<0> (ls0) (type: overlay)\n<1> (ls1) (type: overlay)
+<0> (ls0) (type: overlay)\n<1> (ls1) (type: overlay)
 ])])
 
 dnl ---------------------------------------------------------------------
diff --git a/tests/ovn-northd.at b/tests/ovn-northd.at
index 62e58fd..5564936 100644
--- a/tests/ovn-northd.at
+++ b/tests/ovn-northd.at
@@ -898,3 +898,25 @@ as northd
 OVS_APP_EXIT_AND_WAIT([ovn-northd])
 
 AT_CLEANUP
+
+AT_SETUP([ovn -- check logical switch type propagation from NBDB to SBDB])
+AT_SKIP_IF([test $HAVE_PYTHON = no])
+ovn_start
+
+ovn-nbctl ls-add ls0
+
+uuid=`ovn-sbctl --bare --columns=_uuid list Datapath`
+echo "LS UUID is: " $uuid
+
+type=`ovn-sbctl get Datapath_Binding ${uuid} external_ids:network-type`
+echo "LS TYPE is: " $type
+AT_CHECK([ovn-sbctl get Datapath_Binding ${uuid} external_ids:network-type], [0], [overlay
+])
+
+ovn-nbctl ls-set-network-type ls0 bridged
+type=`ovn-sbctl get Datapath_Binding ${uuid} external_ids:network-type`
+echo "LS TYPE is: " $type
+AT_CHECK([ovn-sbctl get Datapath_Binding ${uuid} external_ids:network-type], [0], [bridged
+])
+
+AT_CLEANUP
diff --git a/tests/ovn.at b/tests/ovn.at
index 6499df3..f93f8f9 100644
--- a/tests/ovn.at
+++ b/tests/ovn.at
@@ -14021,3 +14021,200 @@ ovn-hv4-0
 
 OVN_CLEANUP([hv1], [hv2], [hv3])
 AT_CLEANUP
+
+AT_SETUP([ovn -- 2 HVs, 2 lports/HV, localnet ports, DVR chassis mac])
+ovn_start
+
+
+# In this test cases we create 2 switches, all connected to same
+# physical network (through br-phys on each HV). Each switch has
+# 1 VIF. Each HV has 1 VIF port. The first digit
+# of VIF port name indicates the hypervisor it is bound to, e.g.
+# lp23 means VIF 3 on hv2.
+#
+# Each switch's VLAN tag and their logical switch ports are:
+#   - ls1:
+#       - tagged with VLAN 101
+#       - ports: lp11
+#   - ls2:
+#       - tagged with VLAN 201
+#       - ports: lp22
+#
+# Note: a localnet port is created for each switch to connect to
+# physical network.
+
+for i in 1 2; do
+    ls_name=ls$i
+    ovn-nbctl ls-add $ls_name bridged
+    ln_port_name=ln$i
+    if test $i -eq 1; then
+        ovn-nbctl lsp-add $ls_name $ln_port_name "" 101
+    elif test $i -eq 2; then
+        ovn-nbctl lsp-add $ls_name $ln_port_name "" 201
+    fi
+    ovn-nbctl lsp-set-addresses $ln_port_name unknown
+    ovn-nbctl lsp-set-type $ln_port_name localnet
+    ovn-nbctl lsp-set-options $ln_port_name network_name=phys
+done
+
+# lsp_to_ls LSP
+#
+# Prints the name of the logical switch that contains LSP.
+lsp_to_ls () {
+    case $1 in dnl (
+        lp?[[11]]) echo ls1 ;; dnl (
+        lp?[[12]]) echo ls2 ;; dnl (
+        *) AT_FAIL_IF([:]) ;;
+    esac
+}
+
+vif_to_ls () {
+    case $1 in dnl (
+        vif?[[11]]) echo ls1 ;; dnl (
+        vif?[[12]]) echo ls2 ;; dnl (
+        *) AT_FAIL_IF([:]) ;;
+    esac
+}
+
+hv_to_num () {
+    case $1 in dnl (
+        hv1) echo 1 ;; dnl (
+        hv2) echo 2 ;; dnl (
+        *) AT_FAIL_IF([:]) ;;
+    esac
+}
+
+vif_to_num () {
+    case $1 in dnl (
+        vif22) echo 22 ;; dnl (
+        vif21) echo 21 ;; dnl (
+        *) AT_FAIL_IF([:]) ;;
+    esac
+}
+
+vif_to_hv () {
+    case $1 in dnl (
+        vif[[1]]?) echo hv1 ;; dnl (
+        vif[[2]]?) echo hv2 ;; dnl (
+        *) AT_FAIL_IF([:]) ;;
+    esac
+}
+
+vif_to_lrp () {
+    echo router-to-`vif_to_ls $1`
+}
+
+hv_to_chassis_mac () {
+     case $1 in dnl (
+        hv[[1]]) echo aa:bb:cc:dd:ee:11 ;; dnl (
+        hv[[2]]) echo aa:bb:cc:dd:ee:22 ;; dnl (
+        *) AT_FAIL_IF([:]) ;;
+    esac
+}
+
+ip_to_hex() {
+       printf "%02x%02x%02x%02x" "$@"
+}
+
+net_add n1
+for i in 1 2; do
+    sim_add hv$i
+    as hv$i
+    ovs-vsctl add-br br-phys
+    ovs-vsctl set open . external-ids:ovn-bridge-mappings=phys:br-phys
+    ovs-vsctl set open . external-ids:ovn-chassis-mac-mappings="phys:aa:bb:cc:dd:ee:$i$i"
+    ovn_attach n1 br-phys 192.168.0.$i
+
+    ovs-vsctl add-port br-int vif$i$i -- \
+        set Interface vif$i$i external-ids:iface-id=lp$i$i \
+                              options:tx_pcap=hv$i/vif$i$i-tx.pcap \
+                              options:rxq_pcap=hv$i/vif$i$i-rx.pcap \
+                              ofport-request=$i$i
+
+    lsp_name=lp$i$i
+    ls_name=$(lsp_to_ls $lsp_name)
+
+    ovn-nbctl lsp-add $ls_name $lsp_name
+    ovn-nbctl lsp-set-addresses $lsp_name "f0:00:00:00:00:$i$i 192.168.$i.$i"
+    ovn-nbctl lsp-set-port-security $lsp_name f0:00:00:00:00:$i$i
+
+    OVS_WAIT_UNTIL([test x`ovn-nbctl lsp-get-up $lsp_name` = xup])
+
+done
+
+ovn-nbctl lr-add router
+ovn-nbctl lrp-add router router-to-ls1 00:00:01:01:02:03 192.168.1.3/24
+ovn-nbctl lrp-add router router-to-ls2 00:00:01:01:02:05 192.168.2.3/24
+
+ovn-nbctl lsp-add ls1 ls1-to-router -- set Logical_Switch_Port ls1-to-router type=router options:router-port=router-to-ls1 -- lsp-set-addresses ls1-to-router router
+ovn-nbctl lsp-add ls2 ls2-to-router -- set Logical_Switch_Port ls2-to-router type=router options:router-port=router-to-ls2 -- lsp-set-addresses ls2-to-router router
+
+ovn-nbctl --wait=sb sync
+#ovn-sbctl dump-flows
+
+ovn-nbctl show
+ovn-sbctl show
+
+OVN_POPULATE_ARP
+
+test_ip() {
+    # This packet has bad checksums but logical L3 routing doesn't check.
+    local inport=$1 src_mac=$2 dst_mac=$3 src_ip=$4 dst_ip=$5
+    local packet=${dst_mac}${src_mac}08004500001c0000000040110000${src_ip}${dst_ip}0035111100080000
+    shift; shift; shift; shift; shift
+    hv=`vif_to_hv $inport`
+    hv_num=`hv_to_num $hv`
+    chassis_mac=`hv_to_chassis_mac $hv`
+    as $hv ovs-appctl netdev-dummy/receive $inport $packet
+    #as $hv ovs-appctl ofproto/trace br-int in_port=$inport $packet
+    in_ls=`vif_to_ls $inport`
+    in_lrp=`vif_to_lrp $inport`
+    for outport; do
+        out_ls=`vif_to_ls $outport`
+        if test $in_ls = $out_ls; then
+            # Ports on the same logical switch receive exactly the same packet.
+            echo $packet
+        else
+            # Routing decrements TTL and updates source and dest MAC
+            # (and checksum).
+            outport_num=`vif_to_num $outport`
+            out_lrp=`vif_to_lrp $outport`
+            echo f000000000${outport_num}aabbccddee${hv_num}${hv_num}08004500001c00000000"3f1101"00${src_ip}${dst_ip}0035111100080000
+        fi >> $outport.expected
+    done
+}
+
+# Dump a bunch of info helpful for debugging if there's a failure.
+
+echo "------ OVN dump ------"
+ovn-nbctl show
+ovn-sbctl show
+
+echo "------ hv1 dump ------"
+as hv1 ovs-vsctl show
+as hv1 ovs-vsctl list Open_Vswitch
+
+echo "------ hv2 dump ------"
+as hv2 ovs-vsctl show
+as hv2 ovs-vsctl list Open_Vswitch
+
+echo "Send traffic"
+sip=`ip_to_hex 192 168 1 1`
+dip=`ip_to_hex 192 168 2 2`
+test_ip vif11 f00000000011  000001010203 $sip $dip vif22
+
+sleep 1
+
+echo "----------- Post Traffic hv1 dump -----------"
+as hv1 ovs-ofctl -O OpenFlow13 dump-flows br-int
+as hv1 ovs-appctl fdb/show br-phys
+
+echo "----------- Post Traffic hv2 dump -----------"
+as hv2 ovs-ofctl -O OpenFlow13 dump-flows br-int
+as hv2 ovs-appctl fdb/show br-phys
+
+OVN_CHECK_PACKETS([hv2/vif22-tx.pcap], [vif22.expected])
+
+OVN_CLEANUP([hv1],[hv2])
+
+AT_CLEANUP
