Network virtualization promises to play a dominant role in shaping the future Internet by overcoming the Internet ossification problem. Since a single protocol stack cannot accommodate the requirements of diverse application scenarios and network paradigms, it is evident that multiple networks should co-exist on the same network infrastructure. Network virtualization supports this feature by hosting multiple, diverse protocol suites on a shared network infrastructure. Each hosted virtual network instance can dynamically instantiate custom set of protocols and functionalities on the allocated resources (e.g., link bandwidth, CPU, memory) from the network substrate. As this technology matures, it is important to consider the security issues and develop efficient defense mechanisms against potential vulnerabilities in the network architecture. The architectural separation of network entities (i.e., network infrastructures, hosted virtual networks, and end-users) introduce set of attacks that are to some extent different from what can be observed in the current Internet. Each entity is driven by different objectives and hence it cannot be assumed that they always cooperate to ensure all aspects of the network operate correctly and securely. Instead, the network entities may behave in a non-cooperative or malicious way to gain benefits. This work proposes set of defense mechanisms that addresses the following challenges: 1) How can the network virtualization architecture ensure anonymity and user privacy (i.e., confidential packet forwarding functionality) when virtual networks are hosted on third-party network infrastructures?, and 2) With the introduction of flexibility in customizing the virtual network and the need for intrinsic security guarantees, can there be a virtual network instance that effectively prevents unauthorized network access by curbing the attack traffic close to the source and ensure only authorized traffic is transmitted?. To address the above challenges, this dissertation proposes multiple defense mechanisms. In a typical virtualized network, the network infrastructure and the virtual network are managed by different administrative entities that may not trust each other, raising the concern that any honest-but-curious network infrastructure provider may snoop on traffic sent by the hosted virtual networks. In such a scenario, the virtual network might hesitate to disclose operational information (e.g., source and destination addresses of network traffic, routing information, etc.) to the infrastructure provider. However, the network infrastructure does need sufficient information to perform packet forwarding. We present Encrypted IP (EncrIP), a protocol for encrypting IP addresses that hides information about the virtual network while still allowing packet forwarding with longest-prefix matching techniques that are implemented in commodity routers. Using probabilistic encryption, EncrIP can avoid that an observer can identify what traffic belongs to the same source-destination pairs. Our evaluation results show that EncrIP requires only a few MB of memory on the gateways where traffic enters and leaves the network infrastructure. In our prototype implementation of EncrIP on GENI, which uses standard IP header, the success probability of a statistical inference attack to identify packets belonging to the same session is less than 0.001%. Therefore, we believe EncrIP presents a practical solution for protecting privacy in virtualized networks. While virtualizing the infrastructure components introduces flexibility by reprogramming the protocol stack, it doesn't directly solve the security issues that are encountered in the current Internet. On the contrary, the architecture increases the chances of additive vulnerabilities, thereby increasing the attack space to exploit and launch several attacks. Therefore it is important to consider a virtual network instance that ensures only authorized traffic is transmitted and attack traffic is squelched as close to their source as possible. Network virtualization provides an opportunity to host a network that can guarantee such high-levels of security features thereby protecting both the end systems and the network infrastructure components (i.e., routers, switches, etc.). In this work, we introduce a virtual network instance using capabilities-based network which present a fundamental shift in the security design of network architectures. Instead of permitting the transmission of packets from any source to any destination, routers deny forwarding by default. For a successful transmission, packets need to positively identify themselves and their permissions to each router in the forwarding path. The proposed capabilities-based system uses packet credentials based on Bloom filters. This high-performance design of capabilities makes it feasible that traffic is verified on every router in the network and most attack traffic can be contained within a single hop. Our experimental evaluation confirm that less than one percent of attack traffic passes the first hop and the performance overhead can be as low as 6% for large file transfers. Next, to identify packet forwarding misbehaviors in network virtualization, a controller-based misbehavior detection system is discussed as part of the future work. Overall, this dissertation introduces novel security mechanisms that can be instantiated as inherent security features in the network architecture for the future Internet. The technical challenges in this dissertation involves solving problems from computer networking, network security, principles of protocol design, probability and random processes, and algorithms.