There are two options for enabling communication between a VSM and a VEM: Layer 2 and Layer 3 (L2/L3). This is known as the Software Virtual Switch (SVS) mode.
If the VSM and VEM are in the same Layer 2 domain, the best way to connect them is to use the Layer 2 connectivity mode which can be done through the following command line:
Nexus1000v(config-svs-domain)# svs mode L2
If the VSM and the VEM are in different Layer 2 domains, the Layer 3 connectivity mode should be used. This can be achieved through the following command line:
Nexus1000v(config-svs-domain)# svs mode L3
The following figure explains the Layer 3 connectivity in detail: