A system and method for route optimization in PMIP having a first mobile node having a local mobility anchor and anchored at an access router and a second mobile node anchored at an access router is presented. The method includes establishing a binding cache at one access router comprising a mapping of mobile node addresses to access router addresses, populating the binding cache, and updating the mapping of the mobile node addresses in response to a handoff of a mobile node from one access router to another access router, so that a packet is transmitted from the first mobile node to the second mobile node using the mapping in the binding cache. The second access router address is obtained by either transmitting the packet from the first mobile node to the local mobility anchor, or querying neighboring access routers, or broadcasting access router addresses from the local mobility anchor.