A packet processing method is disclosed. According to the method, a first network device receives a first packet sent by a second network device, where the first packet includes a first group identifier corresponding to a VPN on the second network device, a first source device corresponding to the first packet belongs to the VPN, and the first source device is connected to the second network device. The first network device obtains a second group identifier based on a destination address of the first packet, where the second group identifier corresponds to the VPN on a third network device, a first destination device corresponding to the destination address of the first packet belongs to the VPN, and the first destination device is connected to the third network device. The first network device processes the first packet based on the first group identifier and the second group identifier.