A layer-3 virtual router connects two or more virtual networks. Virtual networks are overlaid upon physical networks. Each virtual network (VN) is a layer-2 network that appears to expand an organization's LAN using virtual MAC addresses. The network stack forms a virtual-network packet with a virtual gateway MAC address of the virtual router to reach a remote virtual network. A VN device driver shim intercepts packets and their virtual MAC and IP addresses and encapsulates them with physical packets sent over the Internet. A VN switch table is expanded to include entries for nodes on the remote virtual network so that all nodes on both virtual networks are accessible. A copy of the VN switch table is stored on each node by a virtual network management daemon on the node. A Time-To-Live field in the virtual-network packet is decremented for each virtual hop and a checksum recalculated.