In computer networking, Layer 2 Tunneling Protocol (L2TP) is a tunneling protocol used to support virtual private networks (VPNs) or as part of the delivery of services by ISPs.  It uses encryption ('hiding') only for its own control messages (using an optional pre-shared secret), and does not provide any encryption or confidentiality of content by itself. Rather, it provides a tunnel for Layer 2 (which may be encrypted), and the tunnel itself may be passed over a Layer 3 encryption protocol such as IPsec.
 Published in August 1999 as proposed standard RFC 2661, L2TP has its origins primarily in two older tunneling protocols for point-to-point communication: Cisco's Layer 2 Forwarding Protocol (L2F) and Microsoft's
Point-to-Point Tunneling Protocol (PPTP). A new version of this protocol, L2TPv3, appeared as proposed standard RFC 3931 in 2005. L2TPv3 provides additional security features, improved encapsulation, and the ability to carry data links other than simply Point-to-Point Protocol (PPP) over an IP network (for example: Frame Relay, Ethernet, ATM, etc.).
 The entire L2TP packet, including payload and L2TP header, is sent within a User Datagram Protocol (UDP) datagram. A virtue of transmission over UDP (rather than TCP) is that it avoids the "TCP meltdown problem". It is common to carry PPP sessions within an L2TP tunnel. L2TP does not provide confidentiality or strong authentication by itself. IPsec is often used to secure L2TP packets by providing confidentiality, authentication and integrity. The combination of these two protocols is generally known as L2TP/IPsec (discussed below).
 The two endpoints of an L2TP tunnel are called the L2TP access concentrator (LAC) and the L2TP network server (LNS). The LNS waits for new tunnels. Once a tunnel is established, the network traffic between the peers is bidirectional. To be useful for networking, higher-level protocols are then run through the L2TP tunnel. To facilitate this, an L2TP session is established within the tunnel for each higher-level protocol such as PPP. Either the LAC or LNS may initiate sessions.  The traffic for each session is isolated by L2TP, so it is possible to set up multiple virtual networks across a single tunnel.
 The packets exchanged within an L2TP tunnel are categorized as either control packets or data packets. L2TP provides reliability features for the control packets, but no reliability for data packets. Reliability, if desired, must be provided by the nested protocols running within each session of the L2TP tunnel.
 L2TP allows the creation of a virtual private dialup network (VPDN) to connect a remote client to its corporate network by using a shared infrastructure, which could be the Internet or a service provider's network.
 An L2TP tunnel can extend across an entire PPP session or only across one segment of a two-segment session. This can be represented by four different tunneling models, namely:
 An L2TP packet consists of :
 Field meanings:
 At the time of setup of L2TP connection, many control packets are exchanged between server and client to establish tunnel and session for each direction. One peer requests the other peer to assign a specific tunnel and session id through these control packets. Then using this tunnel and session id, data packets are exchanged with the compressed PPP frames as payload.
 The list of L2TP Control messages exchanged between LAC and LNS, for handshaking before establishing a tunnel and session in voluntary tunneling method are
 
 Because of the lack of confidentiality inherent in the L2TP protocol, it is often implemented along with IPsec. This is referred to as L2TP/IPsec, and is standardized in IETF RFC 3193. The process of setting up an L2TP/IPsec VPN is as follows:
 When the process is complete, L2TP packets between the endpoints are encapsulated by IPsec. Since the L2TP packet itself is wrapped and hidden within the IPsec packet, the original source and destination IP address is encrypted within the packet. Also, it is not necessary to open UDP port 1701 on firewalls between the endpoints, since the inner packets are not acted upon until after IPsec data has been decrypted and stripped, which only takes place at the endpoints.
 A potential point of confusion in L2TP/IPsec is the use of the terms tunnel and secure channel. The term tunnel-mode refers to a channel which allows untouched packets of one network to be transported over another network. In the case of L2TP/PPP, it allows L2TP/PPP packets to be transported over IP. A secure channel refers to a connection within which the confidentiality of all data is guaranteed. In L2TP/IPsec, first IPsec provides a secure channel, then L2TP provides a tunnel. IPsec also specifies a tunnel protocol: this is not used when a L2TP tunnel is used.
 Windows has had native support (configurable in control panel) for L2TP since Windows 2000. Windows Vista added 2 alternative tools, an MMC snap-in called "Windows Firewall with Advanced Security" (WFwAS) and the "netsh advfirewall" command-line tool. One limitation with both of the WFwAS and netsh commands is that servers must be specified by IP address. Windows 10 added the "Add-VpnConnection" and "Set-VpnConnectionIPsecConfiguration" PowerShell commands. A registry key must be created on the client and server if the server is behind a NAT-T device. 
 L2TP is often used by ISPs when internet service over for example ADSL or cable is being resold. From the end user, packets travel over a wholesale network service provider's network to a server called a Broadband Remote Access Server (BRAS), a protocol converter and router combined. On legacy networks the path from end user customer premises' equipment to the BRAS may be over an ATM network. 
From there on, over an IP network, an L2TP tunnel runs from the BRAS (acting as LAC) to an LNS which is an edge router at the boundary of the ultimate destination ISP's IP network.