I understand nested ESXi instances may not be supported. I would like to report that something has changed recently with the ESXi 6.0 and ESXi 6.5 that breaks network communications for nested ESXi guests.
The setup is the following.
An ESXi host has a guest with ESXi 6.5 installed. In the nested ESXi instance a guest is created. The nested guest cannot connect to hosts beyond the nested host though the network. This setup worked as of Monday last week. The changes are each ESXi Host has likely had the latest patches applied. Upon rebooting the nested ESXi's guests network connections failed to work.
Hardware -> ESXi Host -> (guest) nested ESXi -> (nested guest)
The symptoms of the network connections are as follows. A nested guest is unable to obtain an IP though DHCP. If the nested guest is assigned a static IP it is able to ping the nested ESXi host. The nested guest cannot ping the gateway address, DNS servers or other hosts on the same network subnet that are not nested guests. The nested guest does not get ARP data for the network subnet.
I first encountered this issue when I patched two nested ESXi 6.5 to build 7526125. Both of these instances had existing guests and the networking was working correctly before the patch. The patch required the nested ESXi host to reboot. Upon reboot the nested ESXi guests network connections failed to work. All settings appeared correct. The physical hardware hypervisor in this situation is ESXi 6.0. I do not know what patches it has.
To see if the issue is repeatable I tested the following.
In each of the tests the nested guests were tested with PFSense, Windows 10, and Ubuntu Desktop.
1. Create a new install of a nested ESXi 6.6 on the ESXi 6.0 host. Apply patches but not apply the 7526125 patch.
Hardware -> ESXi 6.0 Host -> (guest) nested ESXi 6.5 -> nested guest
Upon each patch I would test and if it failed I would recreate the nested ESXi instance and upgrade the patch before the last and test. In all tests the nested guest failed to obtain a network connection.
Something with the ESXi 6.0 host could be causing the problem.
2. My home ESXi servers were already patched to 7526125. I attempted the same tests created a nested ESXi 6.5 with different guests. Each time I had the same result. The nested guest DHCP would not work and the static IP would only ping the nested host but no other computer on the subnet.
3. I created an ESXi 6.5 guest in VMWare Fusion 8.x. I patched it to 7526125 and a nested guest was able to communicate with the network. The ESXi 6.5 guest network was setup as a proxy sharing the host's network connection.
This is more of a bug report. I don't know if there are any redacted patches for 6.0 but it looks like 6.5 7526125 might have been redacted.
As of now my nested ESXi setup is dead. I can't figure out how to recover the network connectivity. I think if the ESXi 6.0 or 6.5 host is patched to a build it does not matter what version the nested ESXi guest is running. A nested guest's network connections will not work correctly.