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I am living in a college campus and the campus has an internal LAN, which connects to the internet via proxy-servers (let's call them A ). However, I want to set-up a proxy-server ( let's call it B) within the LAN, so that I can relay my request to A via B. Is it possible ? If yes, then how ? Basically, I want to hide a few IP addresses behind a single IP address.

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Does it have to explicitly be a proxy? It sounds like you are describing a regular NAT router. –  Daniel Andersson Apr 8 '12 at 13:20
    
somebody else in the LAN might see everything you send to the proxy on the same LAN. –  barlop Apr 8 '12 at 13:49
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The only requirement as far as "where" a proxy server can be set up is this: can the machines that need to put traffic through it reach it? This usually means they must be in the same subnet and the TCP/UDP ports in question need to be unrestricted. Also the proxy server must be able to reach any destinations it might be asked to connect to.

One thing that isn't terribly uncommon is running a proxy server and setting it to accept incoming connections from localhost only, in this case you can have the proxy server running on your local machine and filtering traffic from that machine only.

Please note that if you are using squid to "hide" IPs that it transmits the original IP in outgoing HTTP headers unless you disable that feature. Been a long time since I've used squid so I don't know how to disable it exactly.

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