Extend an on-premises network using VPN

Azure Stack
Virtual Machines
Virtual Network
VPN Gateway

This reference architecture shows how to extend a network from on premises or from Azure Stack into an Azure virtual network, using a site-to-site virtual private network (VPN). Traffic flows between the on-premises network and Azure through an IPSec VPN tunnel or through the Azure Stack multitenant VPN gateway. Deploy this solution.

Hybrid network spanning on-premises and Azure infrastructures

A diagram of the VPN gateway architecture. An on-premises network connects to an Azure virtual network through a VPN gateway. A virtual network in Azure Stack also connects to the VPN gateway through public VIPs.

Download a Visio file of this architecture.


The architecture consists of the following components.

  • On-premises network. A private local-area network running within an organization.

  • Azure Stack. A network environment on an Azure Stack tenant subscription, running within an organization. The Azure Stack VPN gateway sends encrypted traffic across a public connection to virtual IP (VIP) addresses and includes the following components:

    • Gateway subnet. A special subnet required to deploy the VPN Gateway on Azure Stack.
    • Local network gateway. Indicates the target IP of the VPN gateway in Azure, as well as the address space of the Azure virtual network.
    • Site-to-site VPN tunnel. The connection type (IPSec) and the key shared with the Azure VPN Gateway to encrypt traffic.
  • VPN appliance. A device or service that provides external connectivity to the on-premises network. The VPN appliance may be a hardware device, or it can be a software solution such as the Routing and Remote Access Service (RRAS) in Windows Server 2012. For a list of supported VPN appliances and information on configuring them to connect to an Azure VPN gateway, see the instructions for the selected device in the article About VPN devices for Site-to-Site VPN Gateway connections.

  • Virtual network. The cloud application and the components for the Azure VPN gateway reside in the same virtual network.

  • Azure VPN gateway. The VPN gateway service enables you to connect the virtual network to the on-premises network through a VPN appliance or to connect to Azure Stack through a site-to-site VPN tunnel. For more information, see Connect an on-premises network to a Microsoft Azure virtual network. The VPN gateway includes the following elements:

    • Virtual network gateway. A resource that provides a virtual VPN appliance for the virtual network. It is responsible for routing traffic from the on-premises network to the virtual network.
    • Local network gateway. An abstraction of the on-premises VPN appliance. Network traffic from the cloud application to the on-premises network is routed through this gateway.
    • Connection. The connection has properties that specify the connection type (IPSec) and the key shared with the on-premises VPN appliance to encrypt traffic.
    • Gateway subnet. The virtual network gateway is held in its own subnet, which is subject to various requirements, described in the Recommendations section below.
  • Cloud application. The application hosted in Azure. It might include multiple tiers, with multiple subnets connected through Azure load balancers. For more information about the application infrastructure, see Running Windows VM workloads and Running Linux VM workloads.

  • Internal load balancer. Network traffic from the VPN gateway is routed to the cloud application through an internal load balancer. The load balancer is located in the front-end subnet of the application.

  • Bastion. Azure Bastion allows you to log into VMs in the virtual network through SSH or remote desktop protocol (RDP) without exposing the VMs directly to the internet. If you lose connectivity through the VPN, you can still use Bastion to manage the VMs in the virtual network.


The following recommendations apply for most scenarios. Follow these recommendations unless you have a specific requirement that overrides them.

Virtual network and gateway subnet

Create an Azure virtual network with an address space large enough for all of your required resources. Ensure that the virtual network address space has sufficient room for growth if additional VMs are likely to be needed in the future. The address space of the virtual network must not overlap with the on-premises network. For example, the diagram above uses the address space for the virtual network.

Create a subnet named GatewaySubnet, with an address range of /27. This subnet is required by the virtual network gateway. Allocating 32 addresses to this subnet will help to prevent reaching gateway size limitations in the future. Also, avoid placing this subnet in the middle of the address space. A good practice is to set the address space for the gateway subnet at the upper end of the virtual network address space. The example shown in the diagram uses Here is a quick procedure to calculate the CIDR:

  1. Set the variable bits in the address space of the virtual network to 1, up to the bits being used by the gateway subnet, then set the remaining bits to 0.
  2. Convert the resulting bits to decimal and express it as an address space with the prefix length set to the size of the gateway subnet.

For example, for a virtual network with an IP address range of, applying step #1 above becomes 10.20.0b11111111.0b11100000. Converting that to decimal and expressing it as an address space yields


Do not deploy any VMs to the gateway subnet. Also, do not assign an NSG to this subnet, as it will cause the gateway to stop functioning.

Virtual network gateway

Allocate a public IP address for the virtual network gateway.

Create the virtual network gateway in the gateway subnet and assign it the newly allocated public IP address. Use the gateway type that most closely matches your requirements and that is enabled by your VPN appliance:

  • Create a policy-based gateway if you need to closely control how requests are routed based on policy criteria such as address prefixes. Policy-based gateways use static routing, and only work with site-to-site connections.

  • Create a route-based gateway

    • You connect to the on-premises network using RRAS,
    • You support multi-site or cross-region connections, or
    • You have connections between virtual networks, including routes that traverse multiple virtual networks.

    Route-based gateways use dynamic routing to direct traffic between networks. They can tolerate failures in the network path better than static routes because they can try alternative routes. Route-based gateways can also reduce the management overhead because routes might not need to be updated manually when network addresses change.

For a list of supported VPN appliances, see About VPN devices for Site-to-Site VPN Gateway connections.


After the gateway has been created, you cannot change between gateway types without deleting and re-creating the gateway.

Select the Azure VPN gateway SKU that most closely matches your throughput requirements. For more information, see Gateway SKUs


The Basic SKU is not compatible with Azure ExpressRoute. You can change the SKU after the gateway has been created.

Create routing rules for the gateway subnet that direct incoming application traffic from the gateway to the internal load balancer, rather than allowing requests to pass directly to the application VMs.

On-premises network connection

Create a local network gateway. Specify the public IP address of the on-premises VPN appliance, and the address space of the on-premises network. Note that the on-premises VPN appliance must have a public IP address that can be accessed by the local network gateway in Azure VPN Gateway. The VPN device cannot be located behind a network address translation (NAT) device.

Create a site-to-site connection for the virtual network gateway and the local network gateway. Select the site-to-site (IPSec) connection type, and specify the shared key. Site-to-site encryption with the Azure VPN gateway is based on the IPSec protocol, using preshared keys for authentication. You specify the key when you create the Azure VPN gateway. You must configure the VPN appliance running on-premises with the same key. Other authentication mechanisms are not currently supported.

Ensure that the on-premises routing infrastructure is configured to forward requests intended for addresses in the Azure virtual network to the VPN device.

Open any ports required by the cloud application in the on-premises network.

Test the connection to verify that:

  • The on-premises VPN appliance correctly routes traffic to the cloud application through the Azure VPN gateway.
  • The virtual network correctly routes traffic back to the on-premises network.
  • Prohibited traffic in both directions is blocked correctly.

Azure Stack network connection

This reference architecture shows how to connect a virtual network in your Azure Stack deployment to a virtual network in Azure through the Azure Stack multitenant VPN gateway. A common scenario is to isolate critical operations and sensitive data in Azure Stack and take advantage of Azure for public transaction and transitory, non-sensitive operations.

In this architecture, network traffic flows through a VPN tunnel using the multitenant gateway on Azure Stack. Alternatively, traffic can flow over the Internet between Azure Stack and Azure through tenant VIPs, Azure ExpressRoute, or a network virtual appliance that acts as the VPN endpoint.

Azure Stack virtual network gateway capacity

Both the Azure VPN Gateway and the Azure Stack VPN gateway support Border Gateway Protocol (BGP) for exchanging routing information between Azure and Azure Stack. Azure Stack does not support static routing for the multitenant gateway.

Create an Azure Stack virtual network with an assigned IP address space large enough for all your required resources. The address space of the virtual network must not overlap with any other network that is going to be connected to this virtual network.

A public IP address is assigned to the multitenant gateway during the deployment of Azure Stack. It is taken from the public VIP pool. The Azure Stack operator has no control over what IP address is used but can determine its assignment.


Workload VMs cannot be deployed on the Azure Stack gateway subnet. Also, do not assign an NSG to this subnet, as it will cause the gateway to stop functioning.

Scalability considerations

You can achieve limited vertical scalability by moving from the Basic or Standard VPN Gateway SKUs to the High Performance VPN SKU.

For virtual networks that expect a large volume of VPN traffic, consider distributing the different workloads into separate smaller virtual networks and configuring a VPN gateway for each of them.

You can partition the virtual network either horizontally or vertically. To partition horizontally, move some VM instances from each tier into subnets of the new virtual network. The result is that each virtual network has the same structure and functionality. To partition vertically, redesign each tier to divide the functionality into different logical areas (such as handling orders, invoicing, customer account management, and so on). Each functional area can then be placed in its own virtual network.

Replicating an on-premises Active Directory domain controller in the virtual network, and implementing DNS in the virtual network, can help to reduce some of the security-related and administrative traffic flowing from on-premises to the cloud. For more information, see Extending Active Directory Domain Services (AD DS) to Azure.

Availability considerations

If you need to ensure that the on-premises network remains available to the Azure VPN gateway, implement a failover cluster for the on-premises VPN gateway.

If your organization has multiple on-premises sites, create multi-site connections to one or more Azure virtual networks. This approach requires dynamic (route-based) routing, so make sure that the on-premises VPN gateway supports this feature.

For details about service level agreements, see SLA for VPN Gateway.

On Azure Stack, you can expand VPN gateways to include interfaces to multiple Azure Stack stamps and Azure deployments.

DevOps considerations

Use the Infrastructure as Code (IaC) process for deploying the infrastructure. In this architecture, we've used a set of Azure Building Blocks custom templates deployed using the Azure portal. To automate infrastructure deployment, you can use Azure DevOps Services or other CI/CD solutions. The deployment process is also idempotent.

For a given resource, there can be other resources that must exist before the resource is deployed. Azure Building Blocks templates are also good for dependency tracking because they allow you to define dependencies for resources that are deployed in the same template.

All the main resources (Virtual machine scale set, VPN gateway, Azure Bastion) are in the same virtual network so they are isolated in the same basic workload. It's then easier to associate the workload's specific resources to a team, so that the team can independently manage all aspects of those resources. This isolation enables DevOps to perform continuous integration and continuous delivery (CI/CD).


Monitor diagnostic information from on-premises VPN appliances. This process depends on the features provided by the VPN appliance. For example, if you are using the Routing and Remote Access Service on Windows Server 2012, RRAS logging.

Use Azure VPN gateway diagnostics to capture information about connectivity issues. These logs can be used to track information such as the source and destinations of connection requests, which protocol was used, and how the connection was established (or why the attempt failed).

Monitor the operational logs of the Azure VPN gateway using the audit logs available in the Azure portal. Separate logs are available for the local network gateway, the Azure network gateway, and the connection. This information can be used to track any changes made to the gateway, and can be useful if a previously functioning gateway stops working for some reason.

Audit logs in the Azure portal

A screenshot of the Azure portal, showing audit log events filtered by date.

Monitor connectivity, and track connectivity failure events. You can use a monitoring package such as Nagios to capture and report this information.

To troubleshoot the connection, see Troubleshoot a hybrid VPN connection.

If gateway connectivity from your on-premises network to Azure is down, you can still reach the VMs in the Azure virtual network through Azure Bastion.

Security considerations

Generate a different shared key for each VPN gateway. Use a strong shared key to help resist brute-force attacks.

For Azure Stack connections, generate a different shared key for each VPN tunnel. Use a strong shared key to help resist brute-force attacks.


Currently, you cannot use Azure Key Vault to preshare keys for the Azure VPN gateway.

Ensure that the on-premises VPN appliance uses an encryption method that is compatible with the Azure VPN gateway. For policy-based routing, the Azure VPN gateway supports the AES256, AES128, and 3DES encryption algorithms. Route-based gateways support AES256 and 3DES.

If your on-premises VPN appliance is on a perimeter network (DMZ) that has a firewall between the perimeter network and the Internet, you might have to configure additional firewall rules to allow the site-to-site VPN connection.

If the application in the virtual network sends data to the Internet, consider implementing forced tunneling to route all Internet-bound traffic through the on-premises network. This approach enables you to audit outgoing requests made by the application from the on-premises infrastructure.


Forced tunneling can impact connectivity to Azure services (the Storage Service, for example) and the Windows license manager.

Cost considerations

Use the Azure pricing calculator to estimate costs. For general considerations, see the Cost section in Microsoft Azure Well-Architected Framework.

The services used in this architecture are charged as follows:

Azure VPN Gateway

The main component of this architecture is the VPN gateway service. You are charged based on the amount of time that the gateway is provisioned and available.

All inbound traffic is free, all outbound traffic is charged. Internet bandwidth costs are applied to VPN outbound traffic.

For more information, see VPN Gateway Pricing.

Azure Virtual Network

Azure Virtual Network is free. Every subscription is allowed to create up to 50 virtual networks across all regions.

All traffic that occurs within the boundaries of a virtual network is free. So, communication between two virtual machines in the same virtual network is free.

Azure Bastion

Azure Bastion securely connects to your virtual machine in the virtual network over RDP and SSH without having the need to configure a public IP on the virtual machine. You will need Bastion in every virtual network that contains virtual machines that you want to connect to. This solution is more economical and secure than using jump boxes.

For examples, see Azure Bastion Pricing.

Virtual machine and internal load balancers

In this architecture, internal load balancers are used to load balance traffic inside a virtual network. Basic load balancing between virtual machines that reside in the same virtual network is free.

Virtual machine scale sets are available on all Linux and windows VM sizes. You are only charged for the Azure VMs you deploy and underlying infrastructure resources consumed such as storage and networking. There are no incremental charges for the virtual machine scale sets service.

For more information, see Azure VM pricing.

Deploy the solution

To deploy this reference architecture, see the GitHub readme.

Next steps

Although VPNs can be used to connect virtual networks within Azure, it's not always the best choice. For more information, see Choose between virtual network peering and VPN gateways in Azure.