diff --git a/server/src/com/cloud/network/NetworkModelImpl.java b/server/src/com/cloud/network/NetworkModelImpl.java
index 6fa8bde2f41..3c7329fd6da 100644
--- a/server/src/com/cloud/network/NetworkModelImpl.java
+++ b/server/src/com/cloud/network/NetworkModelImpl.java
@@ -1639,6 +1639,11 @@ public class NetworkModelImpl extends ManagerBase implements NetworkModel {
         if (usedIps.size() != 0) {
             allPossibleIps.removeAll(usedIps);
         }
+
+        String gateway = network.getGateway();
+        if ((gateway != null) && (allPossibleIps.contains(NetUtils.ip2Long(gateway))))
+            allPossibleIps.remove(NetUtils.ip2Long(gateway));
+
         return allPossibleIps;
     }
 
diff --git a/server/src/com/cloud/network/NetworkServiceImpl.java b/server/src/com/cloud/network/NetworkServiceImpl.java
index 5e33d75d6be..0cd3ebe215f 100755
--- a/server/src/com/cloud/network/NetworkServiceImpl.java
+++ b/server/src/com/cloud/network/NetworkServiceImpl.java
@@ -1751,6 +1751,11 @@ public class NetworkServiceImpl extends ManagerBase implements  NetworkService {
         if (usedIps.size() != 0) {
             allPossibleIps.removeAll(usedIps);
         }
+
+        String gateway = network.getGateway();
+        if ((gateway != null) && (allPossibleIps.contains(NetUtils.ip2Long(gateway))))
+            allPossibleIps.remove(NetUtils.ip2Long(gateway));
+
         return allPossibleIps;
     }
 
diff --git a/utils/src/com/cloud/utils/net/NetUtils.java b/utils/src/com/cloud/utils/net/NetUtils.java
index dd40a33934d..5988dd5f337 100755
--- a/utils/src/com/cloud/utils/net/NetUtils.java
+++ b/utils/src/com/cloud/utils/net/NetUtils.java
@@ -632,7 +632,7 @@ public class NetUtils {
         Set<Long> result = new TreeSet<Long>();
         long ip = ip2Long(cidr);
         long startNetMask = ip2Long(getCidrNetmask(size));
-        long start = (ip & startNetMask) + 2;
+        long start = (ip & startNetMask) + 1;
         long end = start;
 
         end = end >> (32 - size);