The network layer provides the functional and procedural means of transferring variable length data sequences from a source to a destination via one or more networks, while maintaining the quality of service requested by the Transport layer. The Network layer performs network routing functions, and might also perform fragmentation and reassembly, and report delivery errors. Routers operate at this layer--sending data throughout the extended network and making the Internet possible. This is a logical addressing scheme - values are chosen by the network engineer. The addressing scheme is hierarchical.

The best-known example of a layer 3 protocol is the Internet Protocol (IP). It manages the connectionless transfer of data one hop at a time, from end system to ingress router, to router to router, and from egress router to destination end system. It is not responsible for reliable delivery to a next hop, but only for the detection of errored packets so they may be discarded. When the medium of the next hop cannot accept a packet in its current length, IP is responsible for fragmenting into sufficiently small packets that the medium can accept it.

A number of layer management protocols, a function defined in the Management Annex, ISO 7498/4, belong to the network layer. These include routing protocols, multicast group management, network layer information and error, and network layer address assignment. It is the function of the payload that makes these belong to the network layer, not the protocol that carries them.