diff --git a/src/vnsw/agent/controller/controller_route_path.cc b/src/vnsw/agent/controller/controller_route_path.cc
index 779ff69b715..d34a46eee63 100644
--- a/src/vnsw/agent/controller/controller_route_path.cc
+++ b/src/vnsw/agent/controller/controller_route_path.cc
@@ -169,17 +169,31 @@ bool ControllerVmRoute::AddChangePath(Agent *agent, AgentPath *path,
         ret = true;
     }
 
-    if (new_tunnel_type == TunnelType::VXLAN) {
-        if (path->vxlan_id() != label_) {
-            path->set_vxlan_id(label_);
-            path->set_label(MplsTable::kInvalidLabel);
-            ret = true;
-        }
+    //Interpret label sent by control node
+    if (tunnel_bmap_ == TunnelType::VxlanType()) {
+        //Only VXLAN encap is sent, so label is VXLAN
+        path->set_vxlan_id(label_);
+        path->set_label(MplsTable::kInvalidLabel);
+    } else if (tunnel_bmap_ == TunnelType::MplsType()) {
+        //MPLS (GRE/UDP) is the only encap sent,
+        //so label is MPLS.
+        path->set_label(label_);
+        path->set_vxlan_id(VxLanTable::kInvalidvxlan_id);
     } else {
-        if (path->label() != label_) {
-            path->set_label(label_);
-            path->set_vxlan_id(VxLanTable::kInvalidvxlan_id);
-            ret = true;
+        //Got a mix of Vxlan and Mpls, so interpret label
+        //as per the computed tunnel type.
+        if (new_tunnel_type == TunnelType::VXLAN) {
+            if (path->vxlan_id() != label_) {
+                path->set_vxlan_id(label_);
+                path->set_label(MplsTable::kInvalidLabel);
+                ret = true;
+            }
+        } else {
+            if (path->label() != label_) {
+                path->set_label(label_);
+                path->set_vxlan_id(VxLanTable::kInvalidvxlan_id);
+                ret = true;
+            }
         }
     }
 
diff --git a/src/vnsw/agent/oper/agent_path.cc b/src/vnsw/agent/oper/agent_path.cc
index 12a42795ffc..251153caa35 100644
--- a/src/vnsw/agent/oper/agent_path.cc
+++ b/src/vnsw/agent/oper/agent_path.cc
@@ -100,7 +100,8 @@ bool AgentPath::ChangeNH(Agent *agent, NextHop *nh) {
         MplsLabelKey key(MplsLabel::MCAST_NH, label_);
         MplsLabel *mpls = static_cast<MplsLabel *>(agent->mpls_table()->
                                                    FindActiveEntry(&key));
-        ret = agent->mpls_table()->ChangeNH(mpls, nh);
+        if (agent->mpls_table()->ChangeNH(mpls, nh))
+            ret = true;
         if (mpls) {
             //Send notify of change
             mpls->get_table_partition()->Notify(mpls);
@@ -360,6 +361,7 @@ bool EvpnDerivedPathData::AddChangePath(Agent *agent, AgentPath *path,
     EvpnDerivedPath *evpn_path = dynamic_cast<EvpnDerivedPath *>(path);
     assert(evpn_path != NULL);
 
+    evpn_path->set_server_ip(reference_path_->server_ip());
     uint32_t label = reference_path_->label();
     if (evpn_path->label() != label) {
         evpn_path->set_label(label);
diff --git a/src/vnsw/agent/test/test_l2route.cc b/src/vnsw/agent/test/test_l2route.cc
index 05e86739d10..27fa0410dbf 100644
--- a/src/vnsw/agent/test/test_l2route.cc
+++ b/src/vnsw/agent/test/test_l2route.cc
@@ -615,6 +615,41 @@ TEST_F(RouteTest, vxlan_network_id_change_for_non_l2_interface) {
     client->WaitForIdle();
 }
 
+TEST_F(RouteTest, RemoteVxlanEncapRoute_1) {
+    client->Reset();
+    VxLanNetworkIdentifierMode(false);
+    client->WaitForIdle();
+    RouteTest::SetTunnelType(TunnelType::MPLS_GRE);
+    DelEncapList();
+    client->WaitForIdle();
+
+    TunnelType::TypeBmap bmap = TunnelType::VxlanType();
+    AddRemoteVmRoute(remote_vm_mac_, remote_vm_ip4_, server1_ip_,
+                     MplsTable::kStartLabel, bmap);
+    WAIT_FOR(1000, 100,
+             (L2RouteFind(vrf_name_, remote_vm_mac_, remote_vm_ip4_) == true));
+
+    BridgeRouteEntry *rt = L2RouteGet(vrf_name_, remote_vm_mac_,
+                                      remote_vm_ip4_);
+    const AgentPath *path = rt->GetActivePath();
+    EXPECT_TRUE(path->tunnel_type() != TunnelType::VXLAN);
+
+    //Update VXLAN in encap prio
+    AddEncapList("MPLSoGRE", "MPLSoUDP", "VXLAN");
+    client->WaitForIdle();
+    path = rt->GetActivePath();
+    EXPECT_TRUE(path->tunnel_type() == TunnelType::VXLAN);
+    const TunnelNH *nh =
+        static_cast<const TunnelNH *>(path->nexthop());
+    EXPECT_TRUE(nh->GetDip()->to_string() == server1_ip_.to_string());
+
+    DeleteRoute(agent_->local_peer(), vrf_name_, remote_vm_mac_,
+                remote_vm_ip4_);
+    client->WaitForIdle();
+    DelEncapList();
+    client->WaitForIdle();
+}
+
 TEST_F(RouteTest, Enqueue_l2_route_add_on_deleted_vrf) {
     struct PortInfo input[] = {
         {"vnet1", 1, "1.1.1.10", "00:00:00:01:01:01", 1, 1},