The DNS resolution will be handled by Envoy and defaults to LOGICAL_DNS. This discovery type can be overridden on a per-gateway basis with the envoy_dns_discovery_type Gateway Option.
If a service contains an instance with a hostname as an address we set the Envoy cluster to use DNS as the discovery type rather than EDS. Since both mesh gateways and terminating gateways route to clusters using SNI, whenever there is a mix of hostnames and IP addresses associated with a service we use the hostname + CDS rather than the IPs + EDS.
Note that we detect hostnames by attempting to parse the service instance's address as an IP. If it is not a valid IP we assume it is a hostname.
* xDS Mesh Gateway Resolver Subset Fixes
The first fix was that clusters were being generated for every service resolver subset regardless of there being any service instances of the associated service in that dc. The previous logic didn’t care at all but now it will omit generating those clusters unless we also have service instances that should be proxied.
The second fix was to respect the DefaultSubset of a service resolver so that mesh-gateways would configure the endpoints of the unnamed subset cluster to only those endpoints matched by the default subsets filters.
* Refactor the gateway endpoint generation to be a little easier to read
Freddy