Construction of overlay networks without any consideration of real network topologies causes inefficient routing in peer-to-peer networks. This paper presents the design and evaluation of a proximity based peer-to-peer overlay network (P3ON). P3ON is composed of two-tier overlay rings. The high tier ring is a global overlay in which every node participates. Whereas, the low tier ring is a local overlay that consists of nodes in the same autonomous system (AS). Since the low tier ring consists of nearby nodes (in the same AS), the lookup latency can be significantly reduced if the first search within the low tier ring is successful. Also, to cope with skewness of load (of key lookup) distribution, P3ON effectively replicates the popular keys (and results) to neighbor nodes and neighbor ASs. Simulation results reveal that P3ON outperforms the existing ring-based P2P network in terms of lookup time and achieves relatively balanced load distribution.