Differences between Layer 2 and Layer 3 VPNs

In a Layer 3 VPN, the routing occurs on the service provider's routers. In a Layer 2 VPN, routing occurs on the customer's routers, typically on the CE router. Layer 3 VPNs require more configuration on the part of the service provider, because the service provider's PE routers must know the customer's routes. Layer 2 VPNs require less configuration on the part of the service provider, because routing is handled by the customer's routers and not the service provider's.