Provided is a system and method for a multi-tenant datacenter with layer 2 cloud interconnection. More specifically the multi-tenant datacenter includes a plurality of client systems in a first datacenter each client system having a set of physical infrastructure resources. A first cloud computing environment is also in the first datacenter, and coupled to the client systems by OSI Layer 2. The first cloud computing environment thereby virtually extending the physical infrastructure resources of each client system. An associated method of providing a multi-tenant datacenter with layer 2 cloud interconnection is also provided.