Address PR comments.

agent/proxycfg/connect_proxy.go

@@ -276,7 +276,7 @@ func (s *handlerConnectProxy) setupWatchesForPeeredUpstream(
 	// set up a watch for them.
 	if mgwMode == structs.MeshGatewayModeLocal {
 		up := &handlerUpstreams{handlerState: s.handlerState}
-		up.setupWatchForLocalGWEndpoints(ctx, snapConnectProxy)
+		up.setupWatchForLocalGWEndpoints(ctx, &snapConnectProxy.ConfigSnapshotUpstreams)
 	} else if mgwMode == structs.MeshGatewayModeNone {
 		s.logger.Warn(fmt.Sprintf("invalid mesh gateway mode 'none', defaulting to 'remote' for %q", uid))
 	}

agent/proxycfg/state_test.go

@@ -766,6 +766,12 @@ func TestState_WatchesAndUpdates(t *testing.T) {
 				require.True(t, snap.ConnectProxy.IntentionsSet)
 				require.Equal(t, ixnMatch, snap.ConnectProxy.Intentions)
 				require.True(t, snap.ConnectProxy.MeshConfigSet)
+
+				if meshGatewayProxyConfigValue == structs.MeshGatewayModeLocal {
+					require.True(t, snap.ConnectProxy.WatchedLocalGWEndpoints.IsWatched("dc1"))
+					_, ok := snap.ConnectProxy.WatchedLocalGWEndpoints.Get("dc1")
+					require.False(t, ok)
+				}
 			},
 		}
 
@@ -799,6 +805,12 @@ func TestState_WatchesAndUpdates(t *testing.T) {
 
 				require.True(t, snap.ConnectProxy.IntentionsSet)
 				require.Equal(t, ixnMatch, snap.ConnectProxy.Intentions)
+
+				if meshGatewayProxyConfigValue == structs.MeshGatewayModeLocal {
+					require.True(t, snap.ConnectProxy.WatchedLocalGWEndpoints.IsWatched("dc1"))
+					_, ok := snap.ConnectProxy.WatchedLocalGWEndpoints.Get("dc1")
+					require.False(t, ok)
+				}
 			},
 		}
 

agent/proxycfg/upstreams.go

@@ -82,15 +82,6 @@ func (s *handlerUpstreams) handleUpdateUpstreams(ctx context.Context, u UpdateEv
 				s.logger.Trace("discovery-chain watch fired for unknown upstream", "upstream", uid)
 				return nil
 			}
-
-			// We have to inspect the discovery chains to see if local mesh gateways need to be watched.
-			for _, target := range resp.Chain.Targets {
-				// Register a gateway watch if any targets are pointing to a peer and require a mode of local.
-				if target.Peer != "" && target.MeshGateway.Mode == structs.MeshGatewayModeLocal {
-					s.setupWatchForLocalGWEndpoints(ctx, snap.ConnectProxy)
-					break
-				}
-			}
 		default:
 			return fmt.Errorf("discovery-chain watch fired for unsupported kind: %s", snap.Kind)
 		}
@@ -335,6 +326,10 @@ func (s *handlerUpstreams) resetWatchesFromChain(
 		if s.source.Datacenter != target.Datacenter || s.proxyID.PartitionOrDefault() != target.Partition {
 			needGateways[gk.String()] = struct{}{}
 		}
+		// Register a local gateway watch if any targets are pointing to a peer and require a mode of local.
+		if target.Peer != "" && target.MeshGateway.Mode == structs.MeshGatewayModeLocal {
+			s.setupWatchForLocalGWEndpoints(ctx, snap)
+		}
 	}
 
 	// If the discovery chain's targets do not lead to watching all endpoints
@@ -560,14 +555,14 @@ func parseReducedUpstreamConfig(m map[string]interface{}) (reducedUpstreamConfig
 
 func (s *handlerUpstreams) setupWatchForLocalGWEndpoints(
 	ctx context.Context,
-	snapConnectProxy configSnapshotConnectProxy,
+	upstreams *ConfigSnapshotUpstreams,
 ) error {
 	gk := GatewayKey{
-		Partition:  s.source.NodePartitionOrDefault(),
+		Partition:  s.proxyID.PartitionOrDefault(),
 		Datacenter: s.source.Datacenter,
 	}
 	// If the watch is already initialized, do nothing.
-	if snapConnectProxy.WatchedLocalGWEndpoints.IsWatched(gk.String()) {
+	if upstreams.WatchedLocalGWEndpoints.IsWatched(gk.String()) {
 		return nil
 	}
 
@@ -581,6 +576,6 @@ func (s *handlerUpstreams) setupWatchForLocalGWEndpoints(
 	if err := watchMeshGateway(ctx, opts); err != nil {
 		return fmt.Errorf("error while watching for local mesh gateway: %w", err)
 	}
-	snapConnectProxy.WatchedLocalGWEndpoints.InitWatch(gk.String(), nil)
+	upstreams.WatchedLocalGWEndpoints.InitWatch(gk.String(), nil)
 	return nil
 }