A system and method providing for the flow of peer-to-peer traffic between end users within an access network without requiring the traffic to pass through a network gateway such as a Broadband Remote Access Server (BRAS). End user devices connect through access nodes to an aggregation network and a gateway. An Upstream Address Resolution Protocol (ARP) proxy and a Downstream ARP proxy are implemented in each access node. The Upstream ARP proxy receives an Upstream ARP request and forwards the request upstream only if peer-to-peer communications are allowed. Otherwise, a reply is sent with the MAC address of the BRAS. The Downstream ARP proxy intercepts a Downstream ARP request for a target device and determines whether the target device is in an ARP Cache in the access node. If so, the proxy sends an ARP reply giving the MAC address of the target device. If not, no ARP reply is sent.