I see 2 cases when it is needed to set proxy ARP in a router, but there might not be the good ones. Additionally I could be missing some other cases as well.
1) - when a DHCP server is not on the same LAN with the hosts, as otherwise the DHCP Discover messages (which are broadcast messages) will not pass the router and so the hosts will never get a reply (i.e. a DHCP offer).
2) - when the hosts are not configured with a Gateway, as otherwise the ARP messages with IPs from another subnets (ARP are broadcast messages) will not be replied.
Is there any exhaustive explanations/links regarding proxy arp?