What is VPN tunneling and how does it work?

A VPN tunnel can reduce exposure to people who can observe traffic on the local network. It is useful on shared networks and for businesses that need protected remote connections. Still, a VPN tunnel is not a complete cybersecurity solution. In this guie, we will explain everything in simple language.

What is VPN tunneling?

VPN tunneling is the process of carrying network packets through another network connection by encapsulating them. Cloudflare explains tunneling as wrapping one packet inside another packet. The original packet becomes the payload of a new packet that can travel across the network. 

• VPN tunneling usually adds encryption as well. 
• Your device and the VPN server establish a protected connection. 
• Traffic sent through that tunnel is encrypted according to the VPN protocol and configuration in use.

Tunneling itself does not automatically mean encryption. Cisco notes that tunneling alone is simply encapsulation. Security comes from the encryption and authentication technologies used with the tunnel. Cisco. That distinction is important when discussing technologies such as GRE.

How does VPN tunneling work?

So, how does VPN tunneling work in practice? The exact process varies by protocol, but most VPN connections follow a similar flow:

• Step 1: The VPN app contacts a selected VPN server and begins establishing the connection.
• Step 2: The client and server verify the information required by the protocol. This may involve certificates, cryptographic keys, login credentials, or other authentication methods.
• Step 3: Network packets are encapsulated so they can travel through the VPN connection.
• Step 4: Supported traffic is encrypted before leaving your device. Someone monitoring the local network would generally see encrypted VPN traffic rather than the contents carried inside the tunnel.
• Step 5: The server receives the VPN packets and processes them according to the protocol.
• Step 6: The VPN server forwards supported traffic to the destination. Return traffic follows the VPN route back to your device.

Encryption protects the connection between your device and the VPN server. Traffic outside that path still depends on the security used by the destination service, such as HTTPS.

Main VPN tunneling protocols

There are several VPN tunneling protocols. They differ in design, performance, platform support, and security features.

VPN tunneling protocol	How it works	General use
WireGuard	Sends encrypted IP packets over UDP using modern cryptography	Personal VPNs, mobile devices, business networking
OpenVPN	Creates TLS-based VPN connections over UDP or TCP	Personal and enterprise VPNs
IKEv2/IPsec	IKEv2 negotiates the connection while IPsec protects data traffic	Mobile and enterprise VPNs
SSTP	Carries PPP traffic through a TLS-protected TCP connection	Primarily Windows environments
L2TP/IPsec	L2TP creates the tunnel while IPsec provides protection	Older and legacy deployments
PPTP	Uses an older point-to-point tunneling design	Legacy compatibility

VPN tunnel mode vs transport mode

Another related search topic is VPN tunnel mode vs transport mode, especially when discussing IPsec. 

In IPsec tunnel mode, the original IP packet is protected and placed inside a new IP packet. This approach is commonly associated with connections between networks or VPN gateways.

Transport mode protects the payload of the original IP packet while keeping the original IP header available for routing. 

The right mode depends on network architecture. 

• Tunnel mode is often useful when traffic needs to travel between separate private networks. 
• Transport mode can be used for protected communication directly between endpoints.

These are IPsec concepts and should not be treated as two universal modes used by every VPN protocol.

What is split tunneling?

With a full-tunnel configuration, supported traffic is normally routed through the VPN connection. With split tunneling, selected apps, destinations, or network traffic can use the VPN while other traffic uses the regular internet connection.

For example, an employee could route access to internal business systems through a corporate VPN while normal web traffic uses the local connection.

• Split tunneling can reduce the amount of traffic sent through a business VPN gateway. 
• It may also improve performance for traffic that does not need to reach private company resources.

The tradeoff is that traffic outside the VPN does not receive the protection provided by that VPN tunnel. Organizations should therefore configure split tunneling around their security and access requirements.

What is GRE tunneling?

GRE stands for Generic Routing Encapsulation. It encapsulates different types of network traffic and carries them through a point-to-point tunnel. GRE is useful for connecting networks and carrying traffic that might not otherwise travel easily across the underlying network. 

Do not describe GRE itself as encrypted. Cisco states that GRE provides encapsulation but not data confidentiality or authentication on its own. You can combine GRE with IPsec when you need encryption.

What is SSH tunneling?

SSH tunneling uses the Secure Shell protocol to forward network connections through an SSH session. 

For example, local port forwarding can take traffic sent to a port on your computer and forward it through an encrypted SSH channel to another system.

OpenSSH documentation describes TCP forwarding through a secure channel and also supports tunnel-device forwarding. OpenBSD Manual Pages

• SSH tunneling can help administrators access specific remote services. 
• It is not automatically the same as a traditional consumer VPN.

A VPN normally handles network traffic at a broader level. An SSH tunnel may instead be configured to forward a particular port, application, or destination.

How can you test a VPN tunnel?

An IP address test can show the public IP address visible to the testing website. 

(When your internet traffic is routed through the VPN, you should see the VPN server’s public IP rather than the public IP assigned directly to your connection.)

A DNS leak test can help show which DNS resolvers are handling your requests. Unexpected DNS servers may indicate that DNS traffic is not following the VPN configuration you expected.

A WebRTC test can also show what network information the browser exposes through WebRTC features.

These checks can help identify routing or configuration issues. They do not prove that every part of a VPN service is secure or that all traffic is encrypted correctly.

Does VPN tunneling improve online privacy?

A properly configured VPN tunnel can add privacy to your network connection. It can encrypt supported traffic between your device and the VPN server. It can also replace the public IP address normally visible to websites with the VPN server’s public IP.

A VPN does not make you anonymous. Websites may still identify users through account logins, cookies, browser information, advertising technologies, and other methods. It also does not prevent phishing or malware. Good account security, software updates, HTTPS, MFA, and careful browsing still matter.

Final thoughts

Modern VPN tunneling protocols such as WireGuard, OpenVPN, and IKEv2/IPsec provide different approaches to creating and maintaining these connections. Older technologies are also changing. Microsoft has reduced default support for PPTP and L2TP in Windows Server 2025 and is retiring SSTP from Azure VPN Gateway. That makes current protocol support an important factor when choosing or managing a VPN.

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