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Peer-to-peer (P2P) software as major Internet applications bring convenience and pleasure to users, while it becomes a nightmare for Internet service providers (ISPs) because they produce huge traffic on the network. The enormous traffic come from the fact that when P2P systems construct overlay networks, they ignore the underlying network topology, so most of the connections are between remote peers and most of the traffic are cross-network traffic. To overcome this, we present a simple mechanism named LHF (least hops first) to construct overlay network mostly with nearby peers. With analysis we show that P2P network constructed by LHF is ldquosmall worldrdquo network, in which most of the connections are local ones, while a few remote connections accelerate the system dramatically. Simulation experiments demonstrate that LHF can decrease cross-network traffic remarkably, and can improve the performance of P2P application at the same time.