In a multi-service network, layer 2 traffic such as IP traffic according to the invention is carried over ATM SVCs or SPVCs. Methods of setting up such connections using the PNNI protocol are also discussed. Using enhancements to the standard ATM SPVC/SVC signaling messages, layer 3 IP routing processes on multi-services switches on opposite ends of the network allow traffic to flow transparently through an underlying layer 2 virtual connection. This provides a simple and efficient way to transport IP packets across an ATM network.