A distributed load balancer system, comprising: a plurality of load balancer nodes (110A-110n); and a plurality of server nodes (130A-130m) each comprising a server and a load balancer module; wherein the plurality of load balancer nodes is configured to distribute packet flows from one or more clients among the plurality of server nodes, wherein, to distribute the packet flows among the plurality of server nodes, the plurality of load balancer nodes is configured to: select server nodes from among the plurality of server nodes to receive connection requests for the packet flows from the clients; and send the connection requests to the selected server nodes; wherein the load balancer module on each server node is configured to: receive a connection request for a packet flow from one of the plurality of load balancer nodes; determine if the connection is to be accepted by the server on the server node; if the server cannot accept the connection, reject the connection request; if the server can accept the connection, cooperate with the plurality of load balancer nodes to establish a connection for the packet flow between the respective client and the respective server; select one of the plurality of load balancer nodes to act as an egress server to receive and forward outgoing traffic from the server node for the respective outbound packet flow of the connection, wherein the selection is based on an identifier for the packet flow between the client and the server; and intercept outgoing IP packets on the connection, encapsulate the outgoing IP packets, and send the IP packets to the selected egress server. a plurality of load balancer nodes (110A-110n); and a plurality of server nodes (130A-130m) each comprising a server and a load balancer module; wherein the plurality of load balancer nodes is configured to distribute packet flows from one or more clients among the plurality of server nodes, wherein, to distribute the packet flows among the plurality of server nodes, the plurality of load balancer nodes is configured to: select server nodes from among the plurality of server nodes to receive connection requests for the packet flows from the clients; and send the connection requests to the selected server nodes; select server nodes from among the plurality of server nodes to receive connection requests for the packet flows from the clients; and send the connection requests to the selected server nodes; wherein the load balancer module on each server node is configured to: receive a connection request for a packet flow from one of the plurality of load balancer nodes; determine if the connection is to be accepted by the server on the server node; if the server cannot accept the connection, reject the connection request; if the server can accept the connection, cooperate with the plurality of load balancer nodes to establish a connection for the packet flow between the respective client and the respective server; select one of the plurality of load balancer nodes to act as an egress server to receive and forward outgoing traffic from the server node for the respective outbound packet flow of the connection, wherein the selection is based on an identifier for the packet flow between the client and the server; and intercept outgoing IP packets on the connection, encapsulate the outgoing IP packets, and send the IP packets to the selected egress server. receive a connection request for a packet flow from one of the plurality of load balancer nodes; determine if the connection is to be accepted by the server on the server node; if the server cannot accept the connection, reject the connection request; if the server can accept the connection, cooperate with the plurality of load balancer nodes to establish a connection for the packet flow between the respective client and the respective server; select one of the plurality of load balancer nodes to act as an egress server to receive and forward outgoing traffic from the server node for the respective outbound packet flow of the connection, wherein the selection is based on an identifier for the packet flow between the client and the server; and intercept outgoing IP packets on the connection, encapsulate the outgoing IP packets, and send the IP packets to the selected egress server.