Azure Networking Cookbook

Connecting VNets using network peering

Another option to connect two Azure VNets is to use network peering. This approach doesn't require the use of a virtual network gateway, so it's more economical to use if the only requirement is to establish a connection between Azure VNets. Network peering uses the Microsoft backbone infrastructure to establish a connection between two VNets, and traffic is routed through private IP addresses only. However, this traffic is not encrypted; it's private traffic that stays on the Microsoft network, similar to what happens to traffic on the same Azure VNet.