A multicast state is generated within a Layer 2 (L2) fabric through a set of L2 tunnel router devices within the L2 fabric. The multicast state is generated without forwarding multicast traffic through Layer 3 (L3) gateways. When a data packet is received for distribution to other devices in the L2 fabric, an underlay multicast tree is defined at an L2 tunnel router device that is to serve as the multicast source for the data packet in the L2 fabric. The data packet is streamed to the other devices through the L2 tunnel router device along the underlay multicast tree without forwarding the data packet through the L3 gateways.