The disclosure provides an approach for deploying an software defined networking (SDN) solution for overlay routing of traffic on a host with colocated a workload virtual machine (VM), addressable on an overlay network and VM addressable on an underlay network. An overlay interceptor in a hypervisor of the host can intercept traffic from a virtual switch and route the traffic to destination VM. The overlay interceptor can route the traffic directly, without the traffic exiting the host. A fast path can be created for the routing.