A system for dynamically activating a virtual network is provided. During operation, the system can operate a switch as a tunnel endpoint of a tunnel in conjunction with a remote switch. The tunnel can facilitate a virtual private network (VPN) spanning the switch and the remote switch. The system can maintain an inactive state for a virtual local area network (VLAN) and a corresponding tunnel network identifier identifying the VLAN for the tunnel. If a notification indicating the activation of the VLAN at a downstream switch is received by the switch, the system can activate the VLAN at the switch. The system can then activate the tunnel network identifier in a routing process of the VPN, thereby enabling sharing of a media access control (MAC) address associated with the VLAN via the tunnel.