When an IP packet enters a label switched domain, Cisco routers functioning as Edge LSRs copy the IP TTL value from the IP packet header onto the TTL value of the label. When the labeled packet encounters an LSR, the label TTL is decremented by 1. This process continues until the labeled packet is converted back into an IP packet at the egress Edge LSR in the MPLS domain, where the label TTL is copied back onto the IP TTL in the IP header. This process is called IP to label TTL propagation.
TTL propagation can be disabled in the MPLS domain. When TTL propagation is disabled, the IP TTL is not copied into the label TTL field, but instead, a value of 255 is written into the label TTL field. IP to label TTL propagation is enabled by default on Cisco routers. Configuration of the no mpls ip propagate-ttl [forwarded | local] command on an Edge LSR (privilege mode) can be used to disable IP to label TTL value propagation for either forwarded traffic or locally generated traffic as depicted by the forwarded and local options of the command. The no version of the command places a TTL value of 255 in the label TTL value.
When propagation is enabled, the command allows a traceroute to show all the hops in the path, including LSRs in the MPLS domain. For example, when traffic is generated by a network in the IP domain not locally connected (like Ethernet LAN or local loopback) to an Edge LSR, the forwarded option disables the IP to MPLS label TTL value propagation. Therefore, when customer performs a traceroute via the provider network, the MPLS domain is transparent to the customer. This is the most common application of this command.
However, if the traffic was to be generated locally by a loopback interface on the Edge LSR, the IP TTL to label TTL value propagation will occur. Therefore, the provider can still perform any troubleshooting if required using traceroute commands. If no options are configured, the TTL propagation is disabled for both locally generated traffic and forwarded traffic. This hides the structure of the MPLS network from a traceroute command