Proxy ARP allows your router to respond to ARP requests on behalf of an Ethernet end node.
The router performs proxy ARP for the ARP requests that come in over the bridged IP interface when both of the following conditions are met:
If you specify that the bridged IP interface performs unrestricted proxy ARP, it also performs proxy ARP when the route is on the interface that received the ARP request.
In most situations, do not configure the router to perform unrestricted proxy ARP. Do so for special situations, such as when cable modems are used. When an IP client broadcasts the ARP request across the Ethernet wire, the end node with the correct IP address responds to the ARP request and provides the correct MAC address. If the unrestricted proxy ARP feature is enabled, the router response is redundant and might fool the IP client into determining that the destination MAC address within its own subnet is the same as the address of the router.