Techniques for creating layer 2 (L2) extension networks are disclosed. One embodiment permits an L2 extension network to be created by deploying, configuring, and connecting a pair of virtual appliances in the data center and the cloud so that the appliances communicate via secure tunnels and bridge networks in the data center and the cloud. A pair of virtual appliances are first deployed in the data center and the cloud, and secure tunnels are then created between the virtual appliances. Thereafter, a stretched network is created by connecting a network interface in each of the virtual appliances to a respective local network, configuring virtual switch ports to which the virtual appliances are connected as sink ports that receive traffic with non-local destinations, and configuring each of the virtual appliances to bridge the network interface therein that is connected to the local network and tunnels between the pair of virtual appliances.