There are provided a system and method of assessing latency of forwarding data packets in virtual environment. The method comprises: generating packet signatures SGD and SGA respectively for departing and arriving data packets; maintaining a first data structure comprising records related to departing packets associated with a first virtual function (VF), each record informative of SGD and registered departure time TD of a given departing packet; responsive to registering arriving time TA of a given monitored arriving packet SGA associated with a second VF, searching the first data structure for a record matching a matching condition SGD=SGA; modifying the matching record to become informative of latency ΔT=TA−TD and adding the modified record to a second data structure; and using data in the second data structure for assessing latency of forwarding packets from the ingress virtual port to the egress virtual port.