I installed SQUID3 on a Linux machine with two ethernet interfaces (eth0 and eth1). I used the default settings in the squid.conf file and uncommented the two lines acl localnet src 192.168.0.0/16 and http_access allow localnet.

eth0 is connected to a router, which provides Internet access. It is assigned an IP 192.168.1.2 by the router. I manually configured eth1 to have an IP address 192.168.5.1. It is connected to a switch. Systems having IP addresses 192.168.5.x are connected to this switch. I ran these two commands for NAT:

iptables -t nat -A PREROUTING -i eth1 -p tcp -m tcp --dport 80 -j DNAT --to-destination 192.168.5.1:3128
iptables -t nat -A PREROUTING -i eth0 -p tcp -m tcp --dport 80 -j REDIRECT --to-ports 3128

But when I try to access internet from a system having IP 192.168.5.2 through the proxy I get an error that says "Access denied". What is wrong with my configuration?