The command no ip proxy-arp was one of those things which I saw in IOS configs and wasn’t to sure what proxy arp is used for or why it exists. Proxy ARP is where a router will respond on behalf of another device, it was used heavily in networks before the days of DHCP & default gateways where a host would ARP for an address that wasn’t on its subnet (modern networks just send the packets to the default gateway instead of arping for the address), the router on the local network would then act as a “proxy” and respond on behalf of the device outside of the subnet.
Proxy ARP isn’t used if hosts are set with default gateways or have routing intelligence, setting a default gateway instead of using proxy ARP is a much better option. Using Proxy ARP instead of a default gateway results in higher ARP traffic & the ARP tables of the hosts get very large as they maintain an IP/MAC binding for every single address the communicate with.
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