A scalable internet protocol (IP) encryption system includes a cryptographic unit that processes sensitive data for packet encryption/decryption and data authentication. A first processing unit with an optional IP Layer hardware accelerator includes a data processing subsystem that processes sensitive data and forwards the data to the cryptographic unit for encryption and data authentication. A management subsystem is operative with the cryptographic unit for configuring IP networking functions and distributing network configuration information to the data processing subsystem through the cryptographic unit. Data processing is separated from management and control functions at the data processing and management subsystems. A second processing unit with an optional IP Layer hardware accelerator receives the encrypted data from the cryptographic unit and processes the encrypted data for IP packet routing, fragmentation and reassembly and receives network configuration information from the management subsystem via the cryptographic unit.