Last Updated: March 2026

Designing a secure cloud network in Microsoft Azure often raises an important architectural question:

Should you use Azure Firewall, Network Security Groups (NSGs), or both?

Many engineers initially assume they serve the same purpose. After all, both allow you to control traffic using rules. However, they operate at different layers of the Azure network stack, provide different capabilities, and are designed for very different use cases.

Misunderstanding these differences can lead to:

• Overly complex network architectures
• Security gaps in production environments
• Unnecessary cloud costs
• Inefficient traffic inspection

In this guide, we will explain how Azure Firewall and NSGs actually work, when to use each one, and how experienced cloud architects combine them in real-world Azure environments.

By the end of this article, you will understand:

• The core differences between Azure Firewall and NSGs
• When each technology should be used
• How they work together in layered network security
• Real-world architecture patterns used by Azure engineers

This guide is updated for Azure networking best practices in 2026.

Quick Fix Summary

If you need the short version:

• Network Security Groups (NSGs) control traffic at the subnet or NIC level using simple allow/deny rules.
• Azure Firewall is a fully managed stateful firewall appliance designed for centralized network traffic inspection.
• NSGs are lightweight and free, while Azure Firewall is a paid service with advanced filtering and logging.
• Most production environments use both together for layered network security.
• Use NSGs for micro-segmentation, and Azure Firewall for perimeter and outbound control.

Understanding Network Security Groups (NSGs)

What is a Network Security Group?

A Network Security Group (NSG) is a fundamental Azure networking feature used to control inbound and outbound traffic at the virtual network level.

NSGs act as packet filtering firewalls that evaluate traffic based on rules.

They can be applied to:

• Subnets
• Individual network interfaces (NICs)

This makes them extremely useful for segmentation inside a virtual network.

How NSG Rules Work

NSGs use priority-based rules to allow or deny traffic.

Each rule contains:

• Source IP address
• Destination IP address
• Port number
• Protocol (TCP/UDP/Any)
• Allow or Deny action
• Priority number

Example NSG rule:

Traffic is processed in priority order, and the first matching rule is applied.

Key Features of NSGs

Network Security Groups provide:

Layer 3 and Layer 4 filtering

• IP address filtering
• Port filtering
• Protocol filtering

Stateful traffic inspection

This means:

• Return traffic is automatically allowed
• No need to create reverse rules

Subnet segmentation

You can isolate workloads such as:

• Web servers
• Application servers
• Databases

Advantages of NSGs

NSGs are widely used because they are:

• Free to use
• Simple to configure
• Highly performant
• Built into Azure networking

They are ideal for:

• Internal network segmentation
• Controlling access between tiers
• Restricting inbound ports

Limitations of NSGs

However, NSGs have some limitations:

• No application-level filtering
• No URL filtering
• No TLS inspection
• No centralized logging comparable to firewall appliances
• No threat intelligence integration

For advanced security controls, Azure provides Azure Firewall.

Understanding Azure Firewall

What is Azure Firewall?

Azure Firewall is a fully managed, cloud-native firewall service designed to protect Azure Virtual Networks.

Unlike NSGs, which act as basic traffic filters, Azure Firewall provides enterprise-grade network security capabilities.

It functions as a central security control point that inspects traffic flowing between:

• Azure virtual networks
• On-premises networks
• The public internet

Key Capabilities of Azure Firewall

Azure Firewall includes advanced features such as:

Application Rule Filtering

Azure Firewall can filter traffic based on:

• Fully Qualified Domain Names (FQDN)
• URLs
• Application types

Example:

Allow outbound access only to:

• Windows Update
• Microsoft 365 services
• Approved SaaS platforms

Threat Intelligence Filtering

Azure Firewall integrates with Microsoft threat intelligence feeds to:

• Block known malicious IP addresses
• Prevent connections to command-and-control servers

TLS Inspection

Advanced tiers of Azure Firewall allow inspection of encrypted traffic.

This enables:

• Malware detection
• Policy enforcement
• Deeper traffic visibility

Centralized Logging and Monitoring

Azure Firewall integrates with:

• Azure Monitor
• Log Analytics
• Microsoft Sentinel

This enables deep security analysis and incident response.

Azure Firewall Architecture

Azure Firewall is typically deployed in a hub-and-spoke architecture.

Example architecture:

Internet
   |
Azure Firewall (Hub VNet)
   |
Spoke VNets
   |---- Web Servers
   |---- App Servers
   |---- Databases

All outbound traffic flows through the firewall for inspection.

This provides centralized security control.

Azure Firewall vs Network Security Groups

The best way to understand the difference is to compare them directly.

In simple terms:

NSGs protect workloads internally.
Azure Firewall protects the entire network perimeter.

Real-World Azure Security Architecture

Experienced Azure architects rarely choose one or the other.

Instead, they implement layered security.

Typical Design Pattern

Perimeter Security

Azure Firewall controls:

• Internet access
• Outbound traffic
• Application filtering

Internal Segmentation

NSGs control:

• Traffic between application tiers
• Micro-segmentation
• Restricting lateral movement

Example:

Internet
   |
Azure Firewall
   |
Web Subnet (NSG)
   |
App Subnet (NSG)
   |
Database Subnet (NSG)

If an attacker compromises a web server, NSGs prevent direct access to the database layer.

Additional Tips for Azure Network Security

Use NSGs for Zero Trust Segmentation

NSGs are excellent for implementing Zero Trust networking principles.

Only allow:

• Required ports
• Required sources
• Required protocols

Everything else should be denied.

Route All Outbound Traffic Through Azure Firewall

Many organizations configure User Defined Routes (UDRs) to force outbound traffic through Azure Firewall.

Benefits include:

• Malware protection
• Traffic monitoring
• Data exfiltration prevention

Enable Firewall Logging

Always enable:

• Firewall diagnostic logs
• Traffic analytics
• Log retention policies

This dramatically improves incident investigation.

FAQ

What is the main difference between Azure Firewall and NSGs?

Network Security Groups filter traffic using basic IP and port rules, while Azure Firewall provides advanced application-level filtering, threat intelligence, and centralized traffic inspection.

Should I use Azure Firewall or NSGs?

Most production environments should use both.

NSGs handle internal network segmentation, while Azure Firewall manages perimeter and outbound traffic security.

Are Network Security Groups free?

Yes. NSGs are included with Azure networking and do not incur additional charges.

Azure Firewall, however, is a paid service billed hourly plus data processing.

Can Azure Firewall replace NSGs?

Technically it could, but it is not recommended.

NSGs are designed for local traffic control within subnets, which keeps architectures simpler and more scalable.

Does Azure Firewall inspect HTTPS traffic?

Yes. Higher tiers of Azure Firewall support TLS inspection, allowing encrypted traffic to be analyzed for security threats.

Conclusion

Azure Firewall and Network Security Groups are not competing technologies. Instead, they solve different security challenges within Azure networks.

Think of them as two layers of protection:

• Network Security Groups provide lightweight, efficient traffic filtering at the subnet level.
• Azure Firewall delivers centralized, enterprise-grade security with advanced inspection capabilities.

For most enterprise environments, the best practice is to deploy both technologies together in a layered security architecture.

This approach improves:

• Network segmentation
• Threat detection
• Outbound traffic control
• Overall cloud security posture

Designing Azure networks with these principles in mind will ensure your infrastructure remains secure, scalable, and aligned with modern cloud security standards.

Last Updated

Last Updated: March 2026

This guide reflects the latest Azure networking and security architecture practices used in modern cloud environments.

Daniel Lutton

From my early days on the helpdesk through roles as a service desk manager, systems administrator, and network engineer, I’ve spent more than 25 years in the IT world. As I transition into cyber security, my goal is to make tech a little less confusing by sharing what I’ve learned and helping others wherever I can.