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3.3. Assigning Private Network IP Addresses to the Internal LAN

Since all INTERNAL MASQed machines should NOT have official Internet assigned addressees, there must be a specific and accepted way to allocate addresses to those machines without conflicting with anyone else's Internet address.

From the original IP Masquerade FAQ:

RFC 1918 is the official document on which IP addresses are to be used in a non-connected or "private" network. There are 3 blocks of numbers set aside specifically for this purpose.

Section 3: Private Address Space

The Internet Assigned Numbers Authority (IANA) has reserved the
following three blocks of the IP address space for private networks:

              10.0.0.0        -   10.255.255.255
              172.16.0.0      -   172.31.255.255
              192.168.0.0     -   192.168.255.255

We will refer to the first block as "24-bit block", the second as "20-bit 
block", and the third as "16-bit" block".  Note that the first block is 
nothing but a single class A network number, while the second block is a set 
of 16 continuous class B network numbers, and the third block is a set of 255 
continuous class C network numbers.

For the record, my preference is to use the 192.168.0.0 network with a 255.255.255.0 Class-C subnet mask and thus this HOWTO reflects this. Any of the above private networks are valid, but just be SURE to use the correct subnet-mask.

So, if you're using a Class-C network, you should number your TCP/IP enabled machines as 192.168.0.1, 192.168.0.2, 192.168.0.3, .., 192.168.0.x

192.168.0.1 is usually set as the internal gateway or Linux MASQ machine which reaches the external network. Please note that 192.168.0.0 and 192.168.0.255 are the Network and Broadcast address respectively (these addresses are RESERVED). Avoid using these addresses on your machines or your network will not function properly.