Title: Confirmation of DHCP delivery in Azure Virtual Networks

Hello @ Cleon Russell,

Thank you for reaching Microsoft Q&A.

Everything you're seeing is completely normal and by design. Your VMs are correctly receiving their IP configuration from Azure's native platform DHCP service. No action is needed on your side.

1.Azure-provided DHCP

• For Azure IaaS VMs, you don’t need (and can’t) stand up your own DHCP server just to get an IP. The Azure platform natively handles DHCP for all VMs in a Virtual Network.

2.168.63.129.16 is Azure’s internal DHCP (and metadata) endpoint

• When your VM reports its DHCP server as 168.63.129.16, that’s the anycast address Azure injects into each VNet so your VM can pull its IP, gateway, DNS, etc.

3.No traditional DHCP scopes in Azure

• You won’t find any DHCP-scope-or-range settings in the portal because Azure derives all IP assignments directly from your VNet and subnet CIDR (for example, 10.1.0.0/24).

4.Firewalls/NVAs don’t serve DHCP by default

• Unless you explicitly deploy and configure a DHCP server (for example, on a Windows/Linux VM with the DHCP role installed) or set up an on-prem relay, Network Virtual Appliances like FortiGates won’t hand out leases—only the Azure platform service does that automatically.

If you ever do need custom DHCP (say for on-prem clients via a relay), you can deploy your own DHCP server on a VM. Microsoft has a step-by-step guide for that here:

References

• https://learn.microsoft.com/troubleshoot/azure/virtual-network/welcome-virtual-network
• https://learn.microsoft.com/azure/virtual-network/how-to-dhcp-azure

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1. DHCP for Azure IaaS virtual machines is provided natively by the Azure platform. Azure virtual networks provide DHCP service and DNS to Azure virtual machines without requiring customer-managed DHCP servers.
2. The IP address 168.63.129.16 is a special Azure virtual public IP used by the platform for several core functions, including DHCP communication for IP address assignment and renewal to VMs. It is also used for Azure VM agent communication, Azure-provided DNS, and load balancer health probes.
3. Azure does not expose or allow configuration of traditional DHCP scopes for Azure VMs. Addressing is derived from the configured virtual network and subnet address spaces. The platform DHCP service allocates IPs to VMs from those ranges; DHCP scope-style configuration is not available to customers.
4. Firewalls or other network virtual appliances in Azure do not provide DHCP to Azure VMs unless explicitly configured for specific scenarios such as serving on-premises clients via DHCP relay. Azure virtual networks already provide DHCP to VMs; customer DHCP servers in Azure are only supported for scenarios like on-premises clients via a DHCP relay agent.

References:

• Azure Virtual Network frequently asked questions (FAQ)
• Azure IP address 168.63.129.16 overview
• Azure fabric communication IPs
• Required FQDNs and endpoints for Azure Virtual Desktop