Method and system are provided for optimization of mobile data communication using byte caching. The method includes: intercepting data communications at a base station, wherein the data communications are between a user equipment and a network; and implementing byte caching at the base station to optimize data transfer between the base station and a byte cache server in the network at a peering point; wherein the network containing the base station supports mobility management of data transfer to and from the user equipment. The method includes providing a byte cache server as a transparent proxy with byte caching functionality where traffic for the user equipment is no longer tunnelled.