What it is:

Proxy ARP is a method by which routers make themselves available to hosts
that do not have a configured default gateway.  Proxy ARP is enabled on
Cisco routers by default.

no ip proxy arp is the command to disable Proxy Arp on a per interface basis.

Consider the following: 

Host A (192.168.1.2/24) needs to send a packet to host B (192.168.2.2/24)
located in another network.   A router with two ethernet ports connects to
the 192.168.1.0 network on its first Ethernet port, and connects to the
192.168.2.0 network on its second Ethernet port.

192.168.1.0                                  192.168.2.0
Network                                      Network
Host A---------------Router------------------Host B
.2                .1        .1               .2

Host A does not have a configured default gateway, and therefore does not
know how to reach a router to connect to hosts outside the 192.168.1.0
network.  Consequently, it may issue an APR request for 192.168.2.2.  The
router, receiving this request on Ethernet 1 (with Proxy ARP enabled), and
knowing how to reach network 192.168.2.0, will issue an ARP Reply with its
own MAC address in the hardware address field of the ARP Reply.  In doing
so, Host A believes that the router's Ethernet1 interface is the interface
of Host B.  Host A will make an entry in its ARP table using the MAC address
of Ethernet1 on the router for Host B and unicast all subsequent packets for
Host B to the router.

See RFCs 925, and 1027.

Are you having specific trouble with something?


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