A system and method can support flooding mechanism using a packet process proxy in a middleware machine environment. The middleware machine environment can comprise a gateway instance that includes an external port for receiving data packets from an external network. The middleware machine environment also comprises one or more host servers, each of which is associated with one or more virtual machines. Furthermore, said host servers can provide virtual interfaces that belong to a virtual hub associated with the gateway instance. At least one said packet is a flooded packet that is specified with an unknown destination address when it is received at the external port. The gateway instance can send the flooded packet to a designated virtual interface on a host server, and a packet process proxy on the host server can forward the flooded packet to a virtual machine on another host server for processing this packet.