Envoy has API versions for both the xDS transport, i.e. the wire protocol for moving resources between a management server and Envoy, and for resources. These are known as the transport and resource API version respectively.
The transport and resource version may be mixed. For example, v3 resources may be transferred over the v2 transport protocol. In addition, an Envoy may consume mixed resource versions for distinct resource types. For example, v3 Clusters may be used alongside v2 Listeners.
Both the transport and resource API versions follow the API versioning support and deprecation policy.
Envoy will internally operate at the latest xDS resource version and all supported versioned resources will be transparently upgrading to this latest version on configuration ingestion. For example, v2 and v3 resources, delivered over either a v2 or v3 transport, or any mix thereof, will be internally converted into v3 resources.