A method and device are disclosed from the perspective of a first remote User Equipment (UE). In one embodiment, the method includes the first remote UE establishing a first Sidelink (SL) Data Radio Bearer (DRB) for transmission to a second remote UE via a relay UE, wherein the first SL DRB is identified by a Radio Bearer (RB) Identity (ID). The method further includes the first remote UE ciphering a sidelink packet to be sent to the second remote UE on the first SL DRB based on at least the RB ID.