diff --git a/api/v1alpha1/submariner_types.go b/api/v1alpha1/submariner_types.go
index 7dc385e15..8bc224353 100644
--- a/api/v1alpha1/submariner_types.go
+++ b/api/v1alpha1/submariner_types.go
@@ -160,10 +160,14 @@ type SubmarinerSpec struct {
 	// Enable NAT between clusters.
 	// +operator-sdk:csv:customresourcedefinitions:type=spec,displayName="Enable NAT"
 	// +operator-sdk:csv:customresourcedefinitions:type=spec,xDescriptors={"urn:alm:descriptor:com.tectonic.ui:booleanSwitch"}
-	NatEnabled bool `json:"natEnabled"`
-
+	NatEnabled          bool `json:"natEnabled"`
 	AirGappedDeployment bool `json:"airGappedDeployment,omitempty"`
 
+	// Is the cluster a hosted cluster.
+	// +operator-sdk:csv:customresourcedefinitions:type=status,displayName="Hosted Cluster"
+	// +operator-sdk:csv:customresourcedefinitions:type=status,xDescriptors={"urn:alm:descriptor:com.tectonic.ui:text"}
+	HostedCluster bool `json:"hostedCluster,omitempty"`
+
 	// Enable automatic Load Balancer in front of the gateways.
 	// +operator-sdk:csv:customresourcedefinitions:type=spec,displayName="Enable Load Balancer"
 	// +operator-sdk:csv:customresourcedefinitions:type=spec,xDescriptors={"urn:alm:descriptor:com.tectonic.ui:booleanSwitch"}
@@ -228,6 +232,11 @@ type SubmarinerStatus struct {
 
 	AirGappedDeployment bool `json:"airGappedDeployment,omitempty"`
 
+	// Is the cluster a hosted cluster.
+	// +operator-sdk:csv:customresourcedefinitions:type=status,displayName="Hosted Cluster"
+	// +operator-sdk:csv:customresourcedefinitions:type=status,xDescriptors={"urn:alm:descriptor:com.tectonic.ui:text"}
+	HostedCluster bool `json:"hostedCluster,omitempty"`
+
 	ColorCodes string `json:"colorCodes,omitempty"`
 
 	// The current cluster ID.
diff --git a/config/crd/bases/submariner.io_submariners.yaml b/config/crd/bases/submariner.io_submariners.yaml
index 89d0ce972..0393c0c40 100644
--- a/config/crd/bases/submariner.io_submariners.yaml
+++ b/config/crd/bases/submariner.io_submariners.yaml
@@ -137,6 +137,8 @@ spec:
               haltOnCertificateError:
                 description: Halt on certificate error (so the pod gets restarted).
                 type: boolean
+              hostedCluster:
+                type: boolean
               imageOverrides:
                 additionalProperties:
                   type: string
diff --git a/controllers/submariner/loadbalancer_resources.go b/controllers/submariner/loadbalancer_resources.go
index c29ca97ef..813aead60 100644
--- a/controllers/submariner/loadbalancer_resources.go
+++ b/controllers/submariner/loadbalancer_resources.go
@@ -91,6 +91,8 @@ func (r *Reconciler) getOCPPlatformType(ctx context.Context) (string, error) {
 }
 
 func newLoadBalancerService(instance *v1alpha1.Submariner, platformTypeOCP string) *corev1.Service {
+	externalTrafficPolicy := corev1.ServiceExternalTrafficPolicyTypeLocal
+
 	var svcAnnotations map[string]string
 
 	switch platformTypeOCP {
@@ -104,6 +106,10 @@ func newLoadBalancerService(instance *v1alpha1.Submariner, platformTypeOCP strin
 			"service.kubernetes.io/ibm-load-balancer-cloud-provider-ip-type":                   "public",
 			"service.kubernetes.io/ibm-load-balancer-cloud-provider-vpc-health-check-protocol": "http",
 		}
+	case string(configv1.KubevirtPlatformType):
+		if instance.Spec.HostedCluster {
+			externalTrafficPolicy = corev1.ServiceExternalTrafficPolicyTypeCluster
+		}
 	default:
 		svcAnnotations = map[string]string{}
 	}
@@ -115,7 +121,7 @@ func newLoadBalancerService(instance *v1alpha1.Submariner, platformTypeOCP strin
 			Annotations: svcAnnotations,
 		},
 		Spec: corev1.ServiceSpec{
-			ExternalTrafficPolicy: corev1.ServiceExternalTrafficPolicyTypeLocal,
+			ExternalTrafficPolicy: externalTrafficPolicy,
 			Type:                  corev1.ServiceTypeLoadBalancer,
 			Selector: map[string]string{
 				// Traffic is directed to the active gateway
diff --git a/controllers/submariner/submariner_controller.go b/controllers/submariner/submariner_controller.go
index c50c69576..e341d9452 100644
--- a/controllers/submariner/submariner_controller.go
+++ b/controllers/submariner/submariner_controller.go
@@ -222,6 +222,7 @@ func (r *Reconciler) Reconcile(ctx context.Context, request reconcile.Request) (
 	instance.Status.Version = instance.Spec.Version
 	instance.Status.NatEnabled = instance.Spec.NatEnabled
 	instance.Status.AirGappedDeployment = instance.Spec.AirGappedDeployment
+	instance.Status.HostedCluster = instance.Spec.HostedCluster
 	instance.Status.ColorCodes = instance.Spec.ColorCodes
 	instance.Status.ClusterID = instance.Spec.ClusterID
 	instance.Status.GlobalCIDR = instance.Spec.GlobalCIDR
diff --git a/controllers/submariner/submariner_controller_test.go b/controllers/submariner/submariner_controller_test.go
index ccb45f641..4707d441a 100644
--- a/controllers/submariner/submariner_controller_test.go
+++ b/controllers/submariner/submariner_controller_test.go
@@ -78,6 +78,7 @@ func testReconciliation() {
 		BeforeEach(func() {
 			t.submariner.Spec.NatEnabled = true
 			t.submariner.Spec.AirGappedDeployment = true
+			t.submariner.Spec.HostedCluster = true
 		})
 
 		It("should populate general Submariner resource Status fields from the Spec", func(ctx SpecContext) {
@@ -86,6 +87,7 @@ func testReconciliation() {
 			updated := t.getSubmariner(ctx)
 			Expect(updated.Status.NatEnabled).To(BeTrue())
 			Expect(updated.Status.AirGappedDeployment).To(BeTrue())
+			Expect(updated.Status.HostedCluster).To(BeTrue())
 			Expect(updated.Status.ClusterID).To(Equal(t.submariner.Spec.ClusterID))
 			Expect(updated.Status.GlobalCIDR).To(Equal(t.submariner.Spec.GlobalCIDR))
 			Expect(updated.Status.NetworkPlugin).To(Equal(t.clusterNetwork.NetworkPlugin))
diff --git a/pkg/embeddedyamls/yamls.go b/pkg/embeddedyamls/yamls.go
index d8c3679dd..a1be0aaf0 100644
--- a/pkg/embeddedyamls/yamls.go
+++ b/pkg/embeddedyamls/yamls.go
@@ -248,6 +248,9 @@ spec:
               haltOnCertificateError:
                 description: Halt on certificate error (so the pod gets restarted).
                 type: boolean
+              hostedCluster:
+                description: Is the cluster a hosted cluster.
+                type: boolean
               imageOverrides:
                 additionalProperties:
                   type: string
@@ -840,6 +843,9 @@ spec:
                 required:
                 - mismatchedContainerImages
                 type: object
+              hostedCluster:
+                description: Is the cluster a hosted cluster.
+                type: boolean
               loadBalancerStatus:
                 description: The status of the load balancer DaemonSet.
                 properties: