diff --git a/dp-core/vr_mirror.c b/dp-core/vr_mirror.c
index d73b03592..667411c6d 100644
--- a/dp-core/vr_mirror.c
+++ b/dp-core/vr_mirror.c
@@ -368,7 +368,7 @@ int
 vr_mirror(struct vrouter *router, uint8_t mirror_id,
           struct vr_packet *pkt, struct vr_forwarding_md *fmd)
 {
-    bool reset;
+    bool reset = true;
     unsigned int captured_len, clone_len = VR_MIRROR_PKT_HEAD_SPACE,
                  mirror_md_len = 0;
     unsigned char default_mme[2] = {0xff, 0x0};
@@ -417,35 +417,37 @@ vr_mirror(struct vrouter *router, uint8_t mirror_id,
      * header. If not get the processed headers by resetting the packet
      * and mirror it
      */
-    reset = true;
-    if (pkt->vp_if && pkt->vp_if->vif_type == VIF_TYPE_PHYSICAL) {
+    if (pkt->vp_if && (pkt->vp_if->vif_type == VIF_TYPE_PHYSICAL)) {
         pkt_nh = pkt->vp_nh;
         if (pkt_nh && (pkt_nh->nh_flags & NH_FLAG_VALID) &&
                     (pkt_nh->nh_type == NH_ENCAP)) {
 
             reset = false;
-            if (pkt_nh->nh_family == AF_INET)
-                clone_len += pkt_nh->nh_encap_len;
-
-            if (vr_pcow(pkt, clone_len))
-                goto fail;
-
-
-            if (pkt_nh->nh_family == AF_INET) {
-                if (!pkt_nh->nh_dev->vif_set_rewrite(pkt_nh->nh_dev, pkt, fmd,
-                    pkt_nh->nh_data, pkt_nh->nh_encap_len))
-                goto fail;
+            if (fmd->fmd_flow_index >= 0) {
+                if (pkt_nh->nh_family == AF_INET)
+                    clone_len += pkt_nh->nh_encap_len;
+
+                if (vr_pcow(pkt, clone_len))
+                    goto fail;
+                clone_len = 0;
+
+                if (pkt_nh->nh_family == AF_INET) {
+                    if (!pkt_nh->nh_dev->vif_set_rewrite(pkt_nh->nh_dev, pkt, fmd,
+                                    pkt_nh->nh_data, pkt_nh->nh_encap_len))
+                        goto fail;
+                }
             }
         }
     }
 
-    if (reset) {
+    if (reset)
         vr_preset(pkt);
+
+    if (clone_len) {
         if (vr_pcow(pkt, clone_len))
             goto fail;
     }
 
-
     pkt->vp_flags |= VP_FLAG_FROM_DP;
     /* Set the GSO and partial checksum flag */
     pkt->vp_flags |= (VP_FLAG_FLOW_SET | VP_FLAG_GSO | VP_FLAG_CSUM_PARTIAL);
diff --git a/dp-core/vr_nexthop.c b/dp-core/vr_nexthop.c
index b03fdcd29..39d8c68f3 100644
--- a/dp-core/vr_nexthop.c
+++ b/dp-core/vr_nexthop.c
@@ -407,6 +407,7 @@ nh_udp_tunnel_helper(struct vr_packet *pkt, unsigned short sport,
 static bool
 nh_udp_tunnel6_helper(struct vr_packet *pkt, struct vr_nexthop *nh)
 {
+    unsigned int v4_ip;
     uint8_t *sip = NULL;
     uint8_t sip6[VR_IP6_ADDRESS_LEN];
 
@@ -417,10 +418,19 @@ nh_udp_tunnel6_helper(struct vr_packet *pkt, struct vr_nexthop *nh)
     if (nh->nh_flags & NH_FLAG_TUNNEL_SIP_COPY) {
         if (pkt->vp_type == VP_TYPE_IP6) {
             ip6 = (struct vr_ip6 *)pkt_network_header(pkt);
+
+            if (pkt->vp_if->vif_type == VIF_TYPE_PHYSICAL)
+                sip = ip6->ip6_dst;
             sip = ip6->ip6_src;
+
         } else if (pkt->vp_type == VP_TYPE_IP) {
             ip = (struct vr_ip *)pkt_network_header(pkt);
-            vr_inet6_generate_ip6(sip6, ip->ip_saddr);
+
+            v4_ip = ip->ip_saddr;
+            if (pkt->vp_if->vif_type == VIF_TYPE_PHYSICAL)
+                v4_ip = ip->ip_daddr;
+
+            vr_inet6_generate_ip6(sip6, v4_ip);
             sip = sip6;
         }
     }
@@ -1302,6 +1312,14 @@ nh_generate_sip(struct vr_nexthop *nh, struct vr_packet *pkt)
 
     iph = (struct vr_ip *)pkt_network_header(pkt);
     if (pkt->vp_type == VP_TYPE_IP) {
+
+        /*
+         * If the packet is from fabric, it must be destined to a VM on
+         * this compute, so lets use dest ip
+         */
+        if (pkt->vp_if->vif_type == VIF_TYPE_PHYSICAL)
+            return iph->ip_daddr;
+
         return iph->ip_saddr;
     }