VXLAN is a network virtualization technology that constructs a virtual Layer 2 network over a Layer 3 network, implementing Layer 2 communication between VMs or hosts even when they are across datacenters.
Similar to a traditional VLAN, a VXLAN allows for intra-VXLAN and inter-VXLAN communication VXLAN does what a VLAN cannot do. It extends the broadcast domain over L3 boundaries while still maintaining L2 domain. It means the hosts in same VXLAN communicate as if they are connected to same L2 infrastructure. This is made possible by a number of VXLAN components