Example methods are provided for a network device to perform packet capture in a software-defined networking (SDN) environment. One example method may comprise detecting an egress packet that includes an inner header addressed from a first node to a second node; and identifying a security policy applicable to the egress packet by comparing one or more fields in the inner header with one or more match fields specified by the security policy. The method may further comprise: based on the security policy, capturing the egress packet in an unencrypted form; performing encryption on the egress packet to generate an encrypted packet that includes the egress packet in an encrypted form; and sending the encrypted packet to the second node.