How to setup Linux as a router for DSL, T1 line etc

There are a few ways to set up a Linux machine as route. Here is a relatively straight forward and common method. This method requires that the system use iptables for Network Address Translation (NAT).
This step by step small howto will help you to setup Linux router only in 2 minutes.

Configuration steps

=> First enable packet forwarding
=> Next setup Network Address Translation using IPTABLES MASQUERADE targets
=> Save the changes
=> Verify everything is working
I'm assuming that your setup is as follows:
A) You are using any Linux distro
B) eth0 is internet interface (connected to router for example) and eth1 connected to your internal lan (connected to your HUB/Switch for example).

My Linux   eth0  --> Internet
box       eth1  --> Lan

Step # 1 Turn on ip forwarding in kernel
1) Open linux kernel configuration file (you must be a root user or use su - command to become a root user):
# vi /etc/sysctl.conf
2) Add/modify following line:
net.ipv4.ip_forward = 1
Step # 2 Restart network
# /etc/init.d/network restartOR# service network restart
Step # 3 Setup IP forwarding and Masquerading (to act as router), you need to use NAT option of iptables as follows (add following rules to your iptables shell script) :
# iptables --table nat --append POSTROUTING --out-interface eth0 -j MASQUERADE
# iptables --append FORWARD --in-interface eth1 -j ACCEPT

Step # 4 You are done! Test it with ping or dig:
# ping your-isp.com
# dig yahoo.com
Step # 5 Point all desktop client to your eth1 IP address as Router/Gateway. Or use DHCP to distribute this information (recommended)
Step # 6 Put code described in step # 3 to script and call it from /etc/rc.local file.