Example methods are provided for a host to perform packet processing using a service chain in a software-defined networking (SDN) environment. The method may comprise establishing a datapath between a first virtualized computing instance and a second virtualized computing instance in the service chain, the datapath bypassing a forwarding element to which the first virtualized computing instance and the second virtualized computing instance are connected. The method may also comprise: the first virtualized computing instance obtaining a packet that requires processing by the service chain, and performing packet processing according to a first service. The method may further comprise: the second virtualized computing instance obtaining the processed packet via the datapath, and performing packet processing according to a second service.