A shortcut routing method to improve packet routing between a visiting mobile host connected to a subnet and a communicating host on the network or the same subnet. When a router receives an IP tunnel packet from a network interface on the visited network, it checks the inner IP packet for its final destination. If the destination IP address of the inner IP packet can be reached from the same network interface, the router decapsulates the IP tunnel packet and sends the inner IP packet directly to the communicating host on the subnet. For every outbound IP packet sent to the communicating host by the visiting mobile host, a portion of the round trip between the mobile host and home agent, is thereby eliminated. Optionally, the router can shortcut IP packets to a visiting mobile host that remains on the same subnet as the communicating host.