proxy arp

In the above diagram , both hosts don't have default routes. But both are in the same /16 subnet. When host1 tries to ping host2 will it be able to ping ? Yes this behaviour due to the Proxy Arp feature.
Note: Cisco by default enabled the proxy arp feature you have to disable it manually .

Check the following Debug messages "debug arp" from the router.
When the Arp request for received on the router Fa0/1 it replies with its own mac address of fa0/1. (c200.03fc.0001)and vice versa

*Mar 1 00:11:43.071: IP ARP: rcvd req src 00aa.00f4.6800, dst FastEthernet0/1
*Mar 1 00:11:43.075: IP ARP: sent rep src c200.03fc.0001,dst 00aa.00f4.6800 FastEthernet0/1

*Mar 1 00:13:13.067: IP ARP: rcvd req src 00aa.0041.1d00, dst FastEthernet0/0
*Mar 1 00:13:13.067: IP ARP: sent rep src c200.03fc.0000,
dst 00aa.0041.1d00 FastEthernet0/0

following command per interface can disable the proxy arp feature.
# no ip proxy-arp.


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