System and method for IP telephony including internal and external call sessions. The system includes at least one IP telephone (IPT), a Service Gateway (SG), and a Media Gateway Controller (MGC). The SG receives a Call Setup request, including a source IP address and a destination telephone number. A first Media Gateway is selected based on the source IP address. A second Media Gateway is selected based on the destination telephone number. A public IP address of the first Media Gateway is compared to a public IP address of the second Media Gateway, and if the same, respective private IP addresses of the first and second Media Gateway are selected for Call Setup. If different, the respective public IP addresses of the first and second Media Gateway are selected for Call Setup. Thus, the system and method distinguish between external and internal call sessions and route the IP traffic accordingly.
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