diff --git a/northd/ovn-northd.8.xml b/northd/ovn-northd.8.xml
index 8f224b07f..5e57f5694 100644
--- a/northd/ovn-northd.8.xml
+++ b/northd/ovn-northd.8.xml
@@ -2484,37 +2484,6 @@ output;
         </p>
       </li>
 
-      <li>
-        <p>
-          For distributed logical routers where one of the logical router ports
-          specifies a <code>redirect-chassis</code>, a priority-400 logical
-          flow for each <code>dnat_and_snat</code> NAT rules configured.
-          These flows will allow to properly forward traffic to the external
-          connections if available and avoid sending it through the tunnel.
-          Assuming the following NAT rule has been configured:
-        </p>
-
-        <pre>
-external_ip = <var>A</var>;
-external_mac = <var>B</var>;
-logical_ip = <var>C</var>;
-        </pre>
-
-        <p>
-          the following action will be applied:
-        </p>
-
-        <pre>
-ip.ttl--;
-reg0 = <var>ip.dst</var>;
-reg1 = <var>A</var>;
-eth.src = <var>B</var>;
-outport = <var>router-port</var>;
-next;
-        </pre>
-
-      </li>
-
       <li>
         <p>
           IPv4 routing table.  For each route to IPv4 network <var>N</var> with
@@ -2660,7 +2629,41 @@ outport = <var>P</var>;
       </li>
     </ul>
 
-    <h3>Ingress Table 12: ARP/ND Resolution</h3>
+    <h3>Ingress Table 12: IP Source Policy</h3>
+
+    <p>
+      This table contains for distributed logical routers where one of
+      the logical router ports specifies a <code>redirect-chassis</code>,
+      a priority-100 logical flow for each <code>dnat_and_snat</code>
+      NAT rules configured.
+      These flows will allow to properly forward traffic to the external
+      connections if available and avoid sending it through the tunnel.
+      Assuming the following NAT rule has been configured:
+    </p>
+
+    <pre>
+external_ip = <var>A</var>;
+external_mac = <var>B</var>;
+logical_ip = <var>C</var>;
+logical_port = <var>D</var>;
+    </pre>
+
+    <p>
+      for IP traffic matching <code>ip.src == <var>C</var> &amp;&amp;
+      is_chassis_resident(<var>D</var>)</code>
+    </p>
+
+    <p>
+      the following action will be applied:
+    </p>
+
+    <pre>
+reg1 = <var>A</var>;
+eth.src = <var>B</var>;
+next;
+    </pre>
+
+    <h3>Ingress Table 13: ARP/ND Resolution</h3>
 
     <p>
       Any packet that reaches this table is an IP packet whose next-hop
@@ -2819,7 +2822,7 @@ outport = <var>P</var>;
 
     </ul>
 
-    <h3>Ingress Table 13: Check packet length</h3>
+    <h3>Ingress Table 14: Check packet length</h3>
 
     <p>
       For distributed logical routers with distributed gateway port configured
@@ -2849,7 +2852,7 @@ REGBIT_PKT_LARGER = check_pkt_larger(<var>L</var>); next;
       and advances to the next table.
     </p>
 
-    <h3>Ingress Table 14: Handle larger packets</h3>
+    <h3>Ingress Table 15: Handle larger packets</h3>
 
     <p>
       For distributed logical routers with distributed gateway port configured
@@ -2898,7 +2901,7 @@ icmp4 {
       and advances to the next table.
     </p>
 
-    <h3>Ingress Table 15: Gateway Redirect</h3>
+    <h3>Ingress Table 16: Gateway Redirect</h3>
 
     <p>
       For distributed logical routers where one of the logical router
@@ -2934,7 +2937,7 @@ icmp4 {
       </li>
     </ul>
 
-    <h3>Ingress Table 16: ARP Request</h3>
+    <h3>Ingress Table 17: ARP Request</h3>
 
     <p>
       In the common case where the Ethernet destination has been resolved, this
diff --git a/northd/ovn-northd.c b/northd/ovn-northd.c
index 6ccd84e49..cecaa9ab3 100644
--- a/northd/ovn-northd.c
+++ b/northd/ovn-northd.c
@@ -175,11 +175,12 @@ enum ovn_stage {
     PIPELINE_STAGE(ROUTER, IN,  IP_ROUTING,      9, "lr_in_ip_routing")   \
     PIPELINE_STAGE(ROUTER, IN,  IP_ROUTING_ECMP, 10, "lr_in_ip_routing_ecmp") \
     PIPELINE_STAGE(ROUTER, IN,  POLICY,          11, "lr_in_policy")       \
-    PIPELINE_STAGE(ROUTER, IN,  ARP_RESOLVE,     12, "lr_in_arp_resolve")  \
-    PIPELINE_STAGE(ROUTER, IN,  CHK_PKT_LEN   ,  13, "lr_in_chk_pkt_len")   \
-    PIPELINE_STAGE(ROUTER, IN,  LARGER_PKTS,     14,"lr_in_larger_pkts")   \
-    PIPELINE_STAGE(ROUTER, IN,  GW_REDIRECT,     15, "lr_in_gw_redirect")  \
-    PIPELINE_STAGE(ROUTER, IN,  ARP_REQUEST,     16, "lr_in_arp_request")  \
+    PIPELINE_STAGE(ROUTER, IN,  IP_SRC_POLICY,   12, "lr_in_ip_src_policy") \
+    PIPELINE_STAGE(ROUTER, IN,  ARP_RESOLVE,     13, "lr_in_arp_resolve")  \
+    PIPELINE_STAGE(ROUTER, IN,  CHK_PKT_LEN   ,  14, "lr_in_chk_pkt_len")   \
+    PIPELINE_STAGE(ROUTER, IN,  LARGER_PKTS,     15,"lr_in_larger_pkts")   \
+    PIPELINE_STAGE(ROUTER, IN,  GW_REDIRECT,     16, "lr_in_gw_redirect")  \
+    PIPELINE_STAGE(ROUTER, IN,  ARP_REQUEST,     17, "lr_in_arp_request")  \
                                                                       \
     /* Logical router egress stages. */                               \
     PIPELINE_STAGE(ROUTER, OUT, UNDNAT,    0, "lr_out_undnat")        \
@@ -7125,8 +7126,6 @@ build_routing_policy_flow(struct hmap *lflows, struct ovn_datapath *od,
     ds_destroy(&actions);
 }
 
-/* default logical flow prioriry for distributed routes */
-#define DROUTE_PRIO 400
 struct parsed_route {
     struct ovs_list list_node;
     struct v46_ip prefix;
@@ -7515,7 +7514,7 @@ build_ecmp_route_flow(struct hmap *lflows, struct ovn_datapath *od,
 }
 
 static void
-add_distributed_routes(struct hmap *lflows, struct ovn_datapath *od)
+add_ip_src_policy_flows(struct hmap *lflows, struct ovn_datapath *od)
 {
     struct ds actions = DS_EMPTY_INITIALIZER;
     struct ds match = DS_EMPTY_INITIALIZER;
@@ -7533,12 +7532,9 @@ add_distributed_routes(struct hmap *lflows, struct ovn_datapath *od)
                       is_ipv4 ? "4" : "6", nat->logical_ip,
                       nat->logical_port);
         char *prefix = is_ipv4 ? "" : "xx";
-        ds_put_format(&actions, "outport = %s; eth.src = %s; "
-                      "%sreg0 = ip%s.dst; %sreg1 = %s; next;",
-                      od->l3dgw_port->json_key, nat->external_mac,
-                      prefix, is_ipv4 ? "4" : "6",
-                      prefix, nat->external_ip);
-        ovn_lflow_add(lflows, od, S_ROUTER_IN_IP_ROUTING, DROUTE_PRIO,
+        ds_put_format(&actions, "eth.src = %s; %sreg1 = %s; next;",
+                      nat->external_mac, prefix, nat->external_ip);
+        ovn_lflow_add(lflows, od, S_ROUTER_IN_IP_SRC_POLICY, 100,
                       ds_cstr(&match), ds_cstr(&actions));
         ds_clear(&match);
         ds_clear(&actions);
@@ -7569,12 +7565,6 @@ add_route(struct hmap *lflows, const struct ovn_port *op,
     }
     build_route_match(op_inport, network_s, plen, is_src_route, is_ipv4,
                       &match, &priority);
-    /* traffic for internal IPs of logical switch ports must be sent to
-     * the gw controller through the overlay tunnels
-     */
-    if (op->nbrp && !op->nbrp->n_gateway_chassis) {
-        priority += DROUTE_PRIO;
-    }
 
     struct ds actions = DS_EMPTY_INITIALIZER;
     ds_put_format(&actions, "ip.ttl--; "REG_ECMP_GROUP_ID" = 0; %sreg0 = ",
@@ -9541,9 +9531,13 @@ build_lrouter_flows(struct hmap *datapaths, struct hmap *ports,
      * logical router
      */
     HMAP_FOR_EACH (od, key_node, datapaths) {
-        if (od->nbr && od->l3dgw_port) {
-            add_distributed_routes(lflows, od);
+        if (!od->nbr) {
+            continue;
+        }
+        if (od->l3dgw_port) {
+            add_ip_src_policy_flows(lflows, od);
         }
+        ovn_lflow_add(lflows, od, S_ROUTER_IN_IP_SRC_POLICY, 0, "1", "next;");
     }
 
     /* Logical router ingress table IP_ROUTING & IP_ROUTING_ECMP: IP Routing.
diff --git a/tests/ovn.at b/tests/ovn.at
index 4370b3728..09952caf6 100644
--- a/tests/ovn.at
+++ b/tests/ovn.at
@@ -10141,20 +10141,6 @@ AT_CHECK([as hv3 ovs-vsctl set Open_vSwitch . external-ids:ovn-bridge-mappings=p
 OVS_WAIT_UNTIL([test 1 = `as hv3 ovs-vsctl show | \
 grep "Port patch-br-int-to-ln_port" | wc -l`])
 
-AT_CHECK([test 1 = `ovn-sbctl dump-flows lr0 | grep lr_in_ip_routing | \
-grep "ip4.src == 10.0.0.3 && is_chassis_resident(\"foo1\")" -c`])
-AT_CHECK([test 1 = `ovn-sbctl dump-flows lr0 | grep lr_in_ip_routing | \
-grep "ip4.src == 10.0.0.4 && is_chassis_resident(\"foo2\")" -c`])
-
-key=`ovn-sbctl --bare --columns tunnel_key list datapath_Binding lr0`
-# Check that the OVS flows appear for the dnat_and_snat entries in
-# lr_in_ip_routing table.
-OVS_WAIT_UNTIL([test 1 = `as hv3 ovs-ofctl dump-flows br-int table=17 | \
-grep "priority=400,ip,metadata=0x$key,nw_src=10.0.0.3" -c`])
-
-OVS_WAIT_UNTIL([test 1 = `as hv3 ovs-ofctl dump-flows br-int table=17 | \
-grep "priority=400,ip,metadata=0x$key,nw_src=10.0.0.4" -c`])
-
 # Re-add nat-addresses option
 ovn-nbctl lsp-set-options lrp0-rp router-port=lrp0 nat-addresses="router"
 
@@ -14957,9 +14943,14 @@ ovs-vsctl -- add-port br-int hv2-vif1 -- \
     set interface hv2-vif1 external-ids:iface-id=sw1-p0 \
     options:tx_pcap=hv2/vif1-tx.pcap \
     options:rxq_pcap=hv2/vif1-rx.pcap \
-    ofport-request=1
+    ofport-request=2
+ovs-vsctl -- add-port br-int hv2-vif2 -- \
+    set interface hv2-vif2 external-ids:iface-id=sw0-p1 \
+    options:tx_pcap=hv2/vif2-tx.pcap \
+    options:rxq_pcap=hv2/vif2-rx.pcap \
+    ofport-request=3
 
-ovn-nbctl create Logical_Router name=lr0 options:chassis=hv1
+ovn-nbctl create Logical_Router name=lr0
 ovn-nbctl ls-add sw0
 ovn-nbctl ls-add sw1
 
@@ -14968,13 +14959,16 @@ ovn-nbctl lsp-add sw0 rp-sw0 -- set Logical_Switch_Port rp-sw0 \
     type=router options:router-port=sw0 \
     -- lsp-set-addresses rp-sw0 router
 
-ovn-nbctl lrp-add lr0 sw1 00:00:02:01:02:03 172.16.1.1/24 2002:0:0:0:0:0:0:1/64
+ovn-nbctl lrp-add lr0 sw1 00:00:02:01:02:03 172.16.1.1/24 2002:0:0:0:0:0:0:1/64 \
+    -- set Logical_Router_Port sw1 options:redirect-chassis="hv2"
 ovn-nbctl lsp-add sw1 rp-sw1 -- set Logical_Switch_Port rp-sw1 \
     type=router options:router-port=sw1 \
     -- lsp-set-addresses rp-sw1 router
 
 ovn-nbctl lsp-add sw0 sw0-p0 \
     -- lsp-set-addresses sw0-p0 "f0:00:00:01:02:03 192.168.1.2 2001::2"
+ovn-nbctl lsp-add sw0 sw0-p1 \
+    -- lsp-set-addresses sw0-p1 "f0:00:00:11:02:03 192.168.1.3 2001::3"
 
 ovn-nbctl lsp-add sw1 sw1-p0 \
     -- lsp-set-addresses sw1-p0 unknown
@@ -15020,6 +15014,20 @@ send_na 2 1 $dst_mac $router_mac1 $dst_ip6 $router_ip6
 
 OVN_CHECK_PACKETS([hv2/vif1-tx.pcap], [expected])
 
+# Create FIP on sw0-p0, add a route on logical router pipeline and
+# ARP request for a unkwon destination is sent using FIP MAC/IP
+ovn-nbctl lr-nat-add lr0 dnat_and_snat 172.16.1.2 192.168.1.3 sw0-p1 f0:00:00:01:02:04
+ovn-nbctl lr-route-add lr0 172.16.2.0/24 172.16.1.11
+
+dst_ip=$(ip_to_hex 172 16 2 10)
+fip_ip=$(ip_to_hex 172 16 1 2)
+src_ip=$(ip_to_hex 192 168 1 3)
+gw_router=$(ip_to_hex 172 16 1 11)
+send_icmp_packet 2 2 f00000110203 $router_mac0 $src_ip $dst_ip 0000 $data
+echo $(get_arp_req f00000010204 $fip_ip $gw_router) >> expected
+
+OVN_CHECK_PACKETS([hv2/vif1-tx.pcap], [expected])
+
 OVN_CLEANUP([hv1],[hv2])
 AT_CLEANUP
 
@@ -15645,7 +15653,7 @@ ovn-sbctl dump-flows lr0 | grep lr_in_arp_resolve | grep "reg0 == 10.0.0.10" \
 # Since the sw0-vir is not claimed by any chassis, eth.dst should be set to
 # zero if the ip4.dst is the virtual ip in the router pipeline.
 AT_CHECK([cat lflows.txt], [0], [dnl
-  table=12(lr_in_arp_resolve  ), priority=100  , match=(outport == "lr0-sw0" && reg0 == 10.0.0.10), action=(eth.dst = 00:00:00:00:00:00; next;)
+  table=13(lr_in_arp_resolve  ), priority=100  , match=(outport == "lr0-sw0" && reg0 == 10.0.0.10), action=(eth.dst = 00:00:00:00:00:00; next;)
 ])
 
 ip_to_hex() {
@@ -15696,7 +15704,7 @@ ovn-sbctl dump-flows lr0 | grep lr_in_arp_resolve | grep "reg0 == 10.0.0.10" \
 # There should be an arp resolve flow to resolve the virtual_ip with the
 # sw0-p1's MAC.
 AT_CHECK([cat lflows.txt], [0], [dnl
-  table=12(lr_in_arp_resolve  ), priority=100  , match=(outport == "lr0-sw0" && reg0 == 10.0.0.10), action=(eth.dst = 50:54:00:00:00:03; next;)
+  table=13(lr_in_arp_resolve  ), priority=100  , match=(outport == "lr0-sw0" && reg0 == 10.0.0.10), action=(eth.dst = 50:54:00:00:00:03; next;)
 ])
 
 # Forcibly clear virtual_parent. ovn-controller should release the binding
@@ -15737,7 +15745,7 @@ ovn-sbctl dump-flows lr0 | grep lr_in_arp_resolve | grep "reg0 == 10.0.0.10" \
 # There should be an arp resolve flow to resolve the virtual_ip with the
 # sw0-p2's MAC.
 AT_CHECK([cat lflows.txt], [0], [dnl
-  table=12(lr_in_arp_resolve  ), priority=100  , match=(outport == "lr0-sw0" && reg0 == 10.0.0.10), action=(eth.dst = 50:54:00:00:00:05; next;)
+  table=13(lr_in_arp_resolve  ), priority=100  , match=(outport == "lr0-sw0" && reg0 == 10.0.0.10), action=(eth.dst = 50:54:00:00:00:05; next;)
 ])
 
 # send the garp from sw0-p2 (in hv2). hv2 should claim sw0-vir
@@ -15760,7 +15768,7 @@ ovn-sbctl dump-flows lr0 | grep lr_in_arp_resolve | grep "reg0 == 10.0.0.10" \
 # There should be an arp resolve flow to resolve the virtual_ip with the
 # sw0-p3's MAC.
 AT_CHECK([cat lflows.txt], [0], [dnl
-  table=12(lr_in_arp_resolve  ), priority=100  , match=(outport == "lr0-sw0" && reg0 == 10.0.0.10), action=(eth.dst = 50:54:00:00:00:04; next;)
+  table=13(lr_in_arp_resolve  ), priority=100  , match=(outport == "lr0-sw0" && reg0 == 10.0.0.10), action=(eth.dst = 50:54:00:00:00:04; next;)
 ])
 
 # Now send arp reply from sw0-p1. hv1 should claim sw0-vir
@@ -15781,7 +15789,7 @@ ovn-sbctl dump-flows lr0 | grep lr_in_arp_resolve | grep "reg0 == 10.0.0.10" \
 > lflows.txt
 
 AT_CHECK([cat lflows.txt], [0], [dnl
-  table=12(lr_in_arp_resolve  ), priority=100  , match=(outport == "lr0-sw0" && reg0 == 10.0.0.10), action=(eth.dst = 50:54:00:00:00:03; next;)
+  table=13(lr_in_arp_resolve  ), priority=100  , match=(outport == "lr0-sw0" && reg0 == 10.0.0.10), action=(eth.dst = 50:54:00:00:00:03; next;)
 ])
 
 # Delete hv1-vif1 port. hv1 should release sw0-vir
@@ -15799,7 +15807,7 @@ ovn-sbctl dump-flows lr0 | grep lr_in_arp_resolve | grep "reg0 == 10.0.0.10" \
 > lflows.txt
 
 AT_CHECK([cat lflows.txt], [0], [dnl
-  table=12(lr_in_arp_resolve  ), priority=100  , match=(outport == "lr0-sw0" && reg0 == 10.0.0.10), action=(eth.dst = 00:00:00:00:00:00; next;)
+  table=13(lr_in_arp_resolve  ), priority=100  , match=(outport == "lr0-sw0" && reg0 == 10.0.0.10), action=(eth.dst = 00:00:00:00:00:00; next;)
 ])
 
 # Now send arp reply from sw0-p2. hv2 should claim sw0-vir
@@ -15820,7 +15828,7 @@ ovn-sbctl dump-flows lr0 | grep lr_in_arp_resolve | grep "reg0 == 10.0.0.10" \
 > lflows.txt
 
 AT_CHECK([cat lflows.txt], [0], [dnl
-  table=12(lr_in_arp_resolve  ), priority=100  , match=(outport == "lr0-sw0" && reg0 == 10.0.0.10), action=(eth.dst = 50:54:00:00:00:04; next;)
+  table=13(lr_in_arp_resolve  ), priority=100  , match=(outport == "lr0-sw0" && reg0 == 10.0.0.10), action=(eth.dst = 50:54:00:00:00:04; next;)
 ])
 
 # Delete sw0-p2 logical port
diff --git a/tests/system-ovn.at b/tests/system-ovn.at
index 9ae6c6b1f..99a0ee07b 100644
--- a/tests/system-ovn.at
+++ b/tests/system-ovn.at
@@ -2747,6 +2747,17 @@ ADD_VETH(alice1, alice1, br-int, "172.16.1.2/24", "f0:00:00:01:02:05", \
 ovn-nbctl lsp-add alice alice1 \
 -- lsp-set-addresses alice1 "f0:00:00:01:02:05 172.16.1.2"
 
+# Add external network
+ADD_NAMESPACES(ext-net)
+ip link add alice-ext netns alice1 type veth peer name ext-veth netns ext-net
+ip -n ext-net link set dev ext-veth up
+ip -n ext-net addr add 10.0.0.1/24 dev ext-veth
+ip -n ext-net route add default via 10.0.0.2
+
+ip -n alice1 link set dev alice-ext up
+ip -n alice1 addr add 10.0.0.2/24 dev alice-ext
+ip netns exec alice1 sysctl -w net.ipv4.conf.all.forwarding=1
+
 # Add DNAT rules
 AT_CHECK([ovn-nbctl lr-nat-add R1 dnat_and_snat 172.16.1.3 192.168.1.2 foo1 00:00:02:02:03:04])
 AT_CHECK([ovn-nbctl lr-nat-add R1 dnat_and_snat 172.16.1.4 192.168.1.3 foo2 00:00:02:02:03:05])
@@ -2754,6 +2765,9 @@ AT_CHECK([ovn-nbctl lr-nat-add R1 dnat_and_snat 172.16.1.4 192.168.1.3 foo2 00:0
 # Add a SNAT rule
 AT_CHECK([ovn-nbctl lr-nat-add R1 snat 172.16.1.1 192.168.0.0/16])
 
+# Add default route to ext-net
+AT_CHECK([ovn-nbctl lr-route-add R1 10.0.0.0/24 172.16.1.2])
+
 ovn-nbctl --wait=hv sync
 OVS_WAIT_UNTIL([ovs-ofctl dump-flows br-int | grep 'nat(src=172.16.1.1)'])
 
@@ -2797,6 +2811,20 @@ sed -e 's/zone=[[0-9]]*/zone=<cleared>/'], [0], [dnl
 icmp,orig=(src=192.168.2.2,dst=172.16.1.2,id=<cleared>,type=8,code=0),reply=(src=172.16.1.2,dst=172.16.1.1,id=<cleared>,type=0,code=0),zone=<cleared>
 ])
 
+# Try to ping external network
+NS_CHECK_EXEC([ext-net], [tcpdump -n -c 3 -i ext-veth dst 172.16.1.3 and icmp > ext-net.pcap &])
+sleep 1
+AT_CHECK([ovn-nbctl lr-nat-del R1 snat])
+NS_CHECK_EXEC([foo1], [ping -q -c 3 -i 0.3 -w 2 10.0.0.1 | FORMAT_PING], \
+[0], [dnl
+3 packets transmitted, 3 received, 0% packet loss, time 0ms
+])
+
+OVS_WAIT_UNTIL([
+    total_pkts=$(cat ext-net.pcap | wc -l)
+    test "${total_pkts}" = "3"
+])
+
 OVS_APP_EXIT_AND_WAIT([ovn-controller])
 
 as ovn-sb
