This issue occurred because earlier versions of NSX for vSphere had a maximum MAC address limit of 1024 per VNI/Host. Once this limit was exceeded, the traffic for the Destination MAC Addresses was flooded across the VNI leading to poor performance.
Note: Mac address learning occurs when there is any broadcast/unknown unicast or Multicast traffic received on a given VNI on an ESXi host, even though the virtual machines on the ESXi host are not communicating. The maximum limit of 1024 MAC Addresses is per VNI/Host.
As part of the DLR ARP resolution process, the DLR uses an ARP proxy mechanism that may result in ESXi hosts learning the DLR pMAC addresses of other prepared ESXi hosts in the Transport Zone.
These MAC addresses are stored in the same MAC table that is used for VMs and therefore the maximum number of VM MAC addresses per host per VNI will actually be less than 1024.
This can explain why the MAC entry count may be at 1024 but the number of VM MAC addresses is lower.
The DLR ARP Suppression feature can reduce DLR ARP traffic. By reducing the number of DLR pMAC addresses learnt by a host, it can allow more VM MAC addresses to be learnt.
DLR ARP Suppression is fully functional on NSX 6.4.0. For earlier releases of NSX see Workaround section.