Recently I came across an L3 switch configuration that I thought was a bit strange. So this question is to understand 1) whether these type of configurations are common practice, and 2) whether you see any issues with it.
I will attempt to describe the scenario from a first person narrative, though I claim no credit/blame for this.
I have two separate subnets A and B with identical IPv4 network id (say 188.8.131.52/16). Each network has one L3 switch and uses the same VLAN ID (say 3) for these subnets. For simplicity consider A and B are almost clones of each other.
These two networks must remain separate broadcast domains. There are many IP addresses that are used in both networks. I cannot change IP address of any of the existing nodes.
Now I have to route IP traffic from a newly added node with IP address 184.108.40.206 in network A to a newly added node in network B with IP address 220.127.116.11.
My L3 switches do not support NAT and replacing these switches is not an option.
The only good news so far is that for the new nodes I can chose IP addresses such that they are unique across both A and B. That is 18.104.22.168 exists only in A and 22.214.171.124 exists only in B.
I add a new VLAN 10 on both switches and assign one port on each switch to this VLAN. Assign 10.1.20.1/24 to vlan 10 routing interface (SVI) of switch A and 10.1.20.2/24 to vlan 10 SVI of switch B.
add ip route 126.96.36.199 255.255.255.255 10.1.20.2 on switch A
add ip route 188.8.131.52 255.255.255.255 10.1.20.1 on switch B
enable proxy arp in VLAN 3 on both switches.
Connect the VLAN 10 port on switch A to the VLAN 10 port on switch B.
When 184.108.40.206 ARPs for 220.127.116.11 the router responds because it has a route configured for this destination and proxy ARP is enabled. When the packet destined for 18.104.22.168 reaches switch A, as per IP forwarding rules the static route with the 32 bit subnet mask is the most preferred route (trumping the local vlan 3 with 16 bit subnet mask), and therefore the packet gets forwarded onto switch B via VLAN 10. In switch B 22.214.171.124/16 is a "connected" (or direct) route and therefore the packet gets forwarded into B's VLAN 3. The reverse happens for traffic coming from B to A. Both VLAN 3 s remain separate and 126.96.36.199 in VLAN 3 on switch A can make a TCP connection to 188.8.131.52 in VLAN 3 on switch B. What can possibly go wrong ?