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iWARP represents the leading edge of high performance Ethernet technologies. By utilizing an asynchronous communication model, iWARP brings the advantages of OS bypass and RDMA technology to Ethernet. The current specification of iWARP is only defined over connection-oriented transports such as TCP. The memory requirements of many connections along with TCP's flow and reliability controls lead to scalability and performance issues for large-scale HPC and datacenter applications. In this research, we propose guidelines to extend iWARP over datagrams to provide better scalability and performance. While the proposed extension is designed for use in both HPC and datacenters, the emphasis of this paper is on HPC applications. We present our software implementation of datagram-iWARP over UDP and MPI over datagram-iWARP. Our microbenchmark and MPI application results show performance and memory usage benefits for MPI applications, promoting the use of datagram-iWARP for large-scale HPC applications.