VNet Peering for Azure Virtual Network lets us directly link two virtual networks in the same region. Virtual machine resources in both virtual networks can connect directly through private IP addresses as if they were part of the same network.

VNet Peering routes packets between virtual networks through the internal Azure backbone network, so there’s no gateway in the path. This allows for a low-latency, high-bandwidth connection between virtual machines in the virtual networks.

VNet Peering also allows transit through the peered virtual networks, so a Network Virtual Appliance or a VPN gateway in one virtual network can be used by a virtual machine in another peered virtual network. Peering works across virtual networks in different subscriptions and between an Azure Resource Manager and an Azure Service Management virtual network. It does not work between two Azure Service Management virtual networks.

For more information, please visit the Virtual Network page.