diff --git a/drivers/net/ethernet/mellanox/mlx4/en_main.c b/drivers/net/ethernet/mellanox/mlx4/en_main.c
index f3c7961a271f..e3c3d122979e 100644
--- a/drivers/net/ethernet/mellanox/mlx4/en_main.c
+++ b/drivers/net/ethernet/mellanox/mlx4/en_main.c
@@ -95,6 +95,28 @@ int en_print(const char *level, const struct mlx4_en_priv *priv,
 	return i;
 }
 
+void mlx4_en_update_loopback_state(struct net_device *dev,
+				   netdev_features_t features)
+{
+	struct mlx4_en_priv *priv = netdev_priv(dev);
+
+	priv->flags &= ~(MLX4_EN_FLAG_RX_FILTER_NEEDED|
+			MLX4_EN_FLAG_ENABLE_HW_LOOPBACK);
+
+	/* Drop the packet if SRIOV is not enabled
+	 * and not performing the selftest or flb disabled
+	 */
+	if (mlx4_is_mfunc(priv->mdev->dev) &&
+	    !(features & NETIF_F_LOOPBACK) && !priv->validate_loopback)
+		priv->flags |= MLX4_EN_FLAG_RX_FILTER_NEEDED;
+
+	/* Set dmac in Tx WQE if we are in SRIOV mode or if loopback selftest
+	 * is requested
+	 */
+	if (mlx4_is_mfunc(priv->mdev->dev) || priv->validate_loopback)
+		priv->flags |= MLX4_EN_FLAG_ENABLE_HW_LOOPBACK;
+}
+
 static int mlx4_en_get_profile(struct mlx4_en_dev *mdev)
 {
 	struct mlx4_en_profile *params = &mdev->profile;
diff --git a/drivers/net/ethernet/mellanox/mlx4/en_netdev.c b/drivers/net/ethernet/mellanox/mlx4/en_netdev.c
index ac1c14f7424a..551ef688a8df 100644
--- a/drivers/net/ethernet/mellanox/mlx4/en_netdev.c
+++ b/drivers/net/ethernet/mellanox/mlx4/en_netdev.c
@@ -1563,6 +1563,8 @@ static int mlx4_en_set_features(struct net_device *netdev,
 		priv->ctrl_flags &=
 			cpu_to_be32(~MLX4_WQE_CTRL_FORCE_LOOPBACK);
 
+	mlx4_en_update_loopback_state(netdev, features);
+
 	return 0;
 
 }
@@ -1731,6 +1733,8 @@ int mlx4_en_init_netdev(struct mlx4_en_dev *mdev, int port,
 	en_warn(priv, "Using %d TX rings\n", prof->tx_ring_num);
 	en_warn(priv, "Using %d RX rings\n", prof->rx_ring_num);
 
+	mlx4_en_update_loopback_state(priv->dev, priv->dev->features);
+
 	/* Configure port */
 	mlx4_en_calc_rx_buf(dev);
 	err = mlx4_SET_PORT_general(mdev->dev, priv->port,
diff --git a/drivers/net/ethernet/mellanox/mlx4/en_rx.c b/drivers/net/ethernet/mellanox/mlx4/en_rx.c
index fed26d867f4e..ed214d05dd71 100644
--- a/drivers/net/ethernet/mellanox/mlx4/en_rx.c
+++ b/drivers/net/ethernet/mellanox/mlx4/en_rx.c
@@ -563,9 +563,6 @@ int mlx4_en_process_rx_cq(struct net_device *dev, struct mlx4_en_cq *cq, int bud
 	unsigned int length;
 	int polled = 0;
 	int ip_summed;
-	struct ethhdr *ethh;
-	dma_addr_t dma;
-	u64 s_mac;
 	int factor = priv->cqe_factor;
 
 	if (!priv->port_up)
@@ -603,21 +600,27 @@ int mlx4_en_process_rx_cq(struct net_device *dev, struct mlx4_en_cq *cq, int bud
 			goto next;
 		}
 
-		/* Get pointer to first fragment since we haven't skb yet and
-		 * cast it to ethhdr struct */
-		dma = be64_to_cpu(rx_desc->data[0].addr);
-		dma_sync_single_for_cpu(priv->ddev, dma, sizeof(*ethh),
-					DMA_FROM_DEVICE);
-		ethh = (struct ethhdr *)(page_address(frags[0].page) +
-					 frags[0].offset);
-		s_mac = mlx4_en_mac_to_u64(ethh->h_source);
+		/* Check if we need to drop the packet if SRIOV is not enabled
+		 * and not performing the selftest or flb disabled
+		 */
+		if (priv->flags & MLX4_EN_FLAG_RX_FILTER_NEEDED) {
+			struct ethhdr *ethh;
+			dma_addr_t dma;
+			u64 s_mac;
+			/* Get pointer to first fragment since we haven't
+			 * skb yet and cast it to ethhdr struct
+			 */
+			dma = be64_to_cpu(rx_desc->data[0].addr);
+			dma_sync_single_for_cpu(priv->ddev, dma, sizeof(*ethh),
+						DMA_FROM_DEVICE);
+			ethh = (struct ethhdr *)(page_address(frags[0].page) +
+						 frags[0].offset);
 
-		/* If source MAC is equal to our own MAC and not performing
-		 * the selftest or flb disabled - drop the packet */
-		if (s_mac == priv->mac &&
-		    !((dev->features & NETIF_F_LOOPBACK) ||
-		      priv->validate_loopback))
-			goto next;
+			/* Drop the packet, since HW loopback-ed it */
+			s_mac = mlx4_en_mac_to_u64(ethh->h_source);
+			if (s_mac == priv->mac)
+				goto next;
+		}
 
 		/*
 		 * Packet is OK - process it.
diff --git a/drivers/net/ethernet/mellanox/mlx4/en_selftest.c b/drivers/net/ethernet/mellanox/mlx4/en_selftest.c
index bf2e5d3f177c..3488c6d9e6b5 100644
--- a/drivers/net/ethernet/mellanox/mlx4/en_selftest.c
+++ b/drivers/net/ethernet/mellanox/mlx4/en_selftest.c
@@ -87,6 +87,8 @@ static int mlx4_en_test_loopback(struct mlx4_en_priv *priv)
         priv->loopback_ok = 0;
 	priv->validate_loopback = 1;
 
+	mlx4_en_update_loopback_state(priv->dev, priv->dev->features);
+
 	/* xmit */
 	if (mlx4_en_test_loopback_xmit(priv)) {
 		en_err(priv, "Transmitting loopback packet failed\n");
@@ -107,6 +109,7 @@ static int mlx4_en_test_loopback(struct mlx4_en_priv *priv)
 mlx4_en_test_loopback_exit:
 
 	priv->validate_loopback = 0;
+	mlx4_en_update_loopback_state(priv->dev, priv->dev->features);
 	return !loopback_ok;
 }
 
diff --git a/drivers/net/ethernet/mellanox/mlx4/en_tx.c b/drivers/net/ethernet/mellanox/mlx4/en_tx.c
index 30724d811115..3b28e167b05b 100644
--- a/drivers/net/ethernet/mellanox/mlx4/en_tx.c
+++ b/drivers/net/ethernet/mellanox/mlx4/en_tx.c
@@ -640,7 +640,7 @@ netdev_tx_t mlx4_en_xmit(struct sk_buff *skb, struct net_device *dev)
 		ring->tx_csum++;
 	}
 
-	if (mlx4_is_mfunc(mdev->dev) || priv->validate_loopback) {
+	if (priv->flags & MLX4_EN_FLAG_ENABLE_HW_LOOPBACK) {
 		/* Copy dst mac address to wqe. This allows loopback in eSwitch,
 		 * so that VFs and PF can communicate with each other
 		 */
diff --git a/drivers/net/ethernet/mellanox/mlx4/mlx4_en.h b/drivers/net/ethernet/mellanox/mlx4/mlx4_en.h
index 43f01650e585..696dcf33619f 100644
--- a/drivers/net/ethernet/mellanox/mlx4/mlx4_en.h
+++ b/drivers/net/ethernet/mellanox/mlx4/mlx4_en.h
@@ -432,6 +432,17 @@ struct ethtool_flow_id {
 	u64 id;
 };
 
+enum {
+	MLX4_EN_FLAG_PROMISC		= (1 << 0),
+	MLX4_EN_FLAG_MC_PROMISC		= (1 << 1),
+	/* whether we need to enable hardware loopback by putting dmac
+	 * in Tx WQE
+	 */
+	MLX4_EN_FLAG_ENABLE_HW_LOOPBACK	= (1 << 2),
+	/* whether we need to drop packets that hardware loopback-ed */
+	MLX4_EN_FLAG_RX_FILTER_NEEDED	= (1 << 3)
+};
+
 struct mlx4_en_priv {
 	struct mlx4_en_dev *mdev;
 	struct mlx4_en_port_profile *prof;
@@ -481,8 +492,6 @@ struct mlx4_en_priv {
 	struct mlx4_en_rss_map rss_map;
 	__be32 ctrl_flags;
 	u32 flags;
-#define MLX4_EN_FLAG_PROMISC	0x1
-#define MLX4_EN_FLAG_MC_PROMISC	0x2
 	u8 num_tx_rings_p_up;
 	u32 tx_ring_num;
 	u32 rx_ring_num;
@@ -534,6 +543,9 @@ enum mlx4_en_wol {
 
 #define MLX4_EN_WOL_DO_MODIFY (1ULL << 63)
 
+void mlx4_en_update_loopback_state(struct net_device *dev,
+				   netdev_features_t features);
+
 void mlx4_en_destroy_netdev(struct net_device *dev);
 int mlx4_en_init_netdev(struct mlx4_en_dev *mdev, int port,
 			struct mlx4_en_port_profile *prof);