Switch – Understanding ARP and Routers

Let me start by saying proxy ARP is at best a sloppy solution. They only time I found it useful as a feature is when I was dealing with devices on the network that could not utilize classless netmasks or couldn't set a default route.

Yes, it can "cover" many client configuration or bad design problems, but it doesn't fix those problems. It also doesn't "cover" all of them and it can make troubleshooting issues more difficult.

Getting back to your question, the most likely reason this isn't working is that your client's aren't ARPing. My guess is that you have given them what is often considered a "standard" network mask of /24. So the solution would be to switch the network masks on the clients to /16.

Why? A client uses it's IP address and network mask to determine if a destination is on the local network or not. If it is on the local network, the client checks it's ARP table for any entries for the destination and if one doesn't exist, will send out an ARP request to get this information. This is where the router with proxy ARP enabled can respond, but if there is no ARP request then the router cannot provide a proxy ARP response.

If the destination is not on the local network, then the client will check it's routing table to see where to forward the traffic. This is typically your default gateway.

Now, with the IP addresses you used, if you used a /24 network mask, when the client checked the destination against it's IP/mask, it would find the destination is not on the local network. Going to the routing table, it won't have a specific entry for the destination network (clients won't by default) and no default route/gateway. It will then fail with a "no route to host" type of message.

isn't a router only deal with IP address

A router with Ethernet (or Ethernet-like) interfaces needs to deal with MAC addresses because it needs to send and receive IP packets over those Ethernet interfaces and MAC addresses are a core part of Ethernet.

MAC addresses only have meaning within an Ethernet network.

Logically what happens at R1 is.

1. The destination MAC address is checked. For a Unicast MAC address* if it doesn't match the frame is dropped by the network card, if it does match the Ethernet frame is stripped and the packet is passed up to the IP stack. This check is important to prevent packet duplication.
2. The IP address is examined and determined to not be one of the local interfaces of the router.
3. The IP address is looked up in the routing table and an interface and next-hop IP address is chosen.
4. What happens next depends on the nature of the connection between R1 and R2. If the connection is Ethernet then the IP packet will be encapsulated in an Ethernet frame with the router's interface as source MAC and a MAC address looked up using the next-hop IP address as destination MAC address. On the other hand if the link is a serial point to point interface then there may be no MAC addresses involved at all and other protocols may have their own addressing scheme.

* Broadcast and multicast packets need more special handling, but that is outside the scope of this question.