Quickstart: Create an internal load balancer to load balance internal traffic to VMs using Terraform

2025-04-03

This quickstart shows you how to deploy a standard internal load balancer and two virtual machines using Terraform. Additional resources include Azure Bastion, NAT Gateway, a virtual network, and the required subnets.

Terraform enables the definition, preview, and deployment of cloud infrastructure. Using Terraform, you create configuration files using HCL syntax. The HCL syntax allows you to specify the cloud provider - such as Azure - and the elements that make up your cloud infrastructure. After you create your configuration files, you create an execution plan that allows you to preview your infrastructure changes before they're deployed. Once you verify the changes, you apply the execution plan to deploy the infrastructure.

Create an Azure resource group using azurerm_resource_group
Create an Azure Virtual Network using azurerm_virtual_network
Create an Azure subnet using azurerm_subnet
Create an Azure public IP using azurerm_public_ip
Create an Azure Load Balancer using azurerm_lb
Create an Azure network interface using azurerm_network_interface
Create an Azure network interface load balancer backend address pool association using azurerm_network_interface_backend_address_pool_association
Create an Azure Linux Virtual Machine using azurerm_linux_virtual_machine
Create an Azure Virtual Machine Extension using azurerm_virtual_machine_extension
Create an Azure NAT Gateway using azurerm_nat_gateway
Create an Azure Bastion using azurerm_bastion_host

Prerequisites

Create an Azure account with an active subscription. You can create an account for free.
Install and configure Terraform

Implement the Terraform code

The sample code for this article is located in the Azure Terraform GitHub repo. You can view the log file containing the test results from current and previous versions of Terraform. See more articles and sample code showing how to use Terraform to manage Azure resources

Create a directory in which to test and run the sample Terraform code, and make it the current directory.

Create a file named providers.tf and insert the following code.

terraform {
  required_providers {
    azurerm = {
      source  = "hashicorp/azurerm"
      version = "~>4.0"
    }
    random = {
      source  = "hashicorp/random"
      version = "~>3.0"
    }
  }
}

provider "azurerm" {
  features {}
}

Create a file named main.tf and insert the following code.

# Create a random name for the resource group
resource "random_pet" "rg" {
  prefix = var.resource_group_name_prefix
}

# Create a resource group using the generated random name
resource "azurerm_resource_group" "example" {
  location = var.resource_group_location
  name     = random_pet.rg.id
}

# Create a Virtual Network to host the Virtual Machines 
# in the Backend Pool of the Load Balancer
resource "azurerm_virtual_network" "example" {
  name                = var.virtual_network_name
  address_space       = ["10.0.0.0/16"]
  location            = azurerm_resource_group.example.location
  resource_group_name = azurerm_resource_group.example.name
}

# Create a subnet in the Virtual Network to host the Virtual Machines
# in the Backend Pool of the Load Balancer
resource "azurerm_subnet" "example" {
  name                 = var.subnet_name
  resource_group_name  = azurerm_resource_group.example.name
  virtual_network_name = azurerm_virtual_network.example.name
  address_prefixes     = ["10.0.1.0/24"]
}

# Create a subnet in the Virtual Network for creating Azure Bastion
# This subnet is required for Azure Bastion to work properly
resource "azurerm_subnet" "bastion" {
  name                 = "AzureBastionSubnet"
  resource_group_name  = azurerm_resource_group.example.name
  virtual_network_name = azurerm_virtual_network.example.name
  address_prefixes     = ["10.0.2.0/24"]
}

# Create Network Security Group and rules to control the traffic
# to and from the Virtual Machines in the Backend Pool
resource "azurerm_network_security_group" "example" {
  name                = var.network_security_group_name
  location            = azurerm_resource_group.example.location
  resource_group_name = azurerm_resource_group.example.name

  security_rule {
    name                       = "ssh"
    priority                   = 1022
    direction                  = "Inbound"
    access                     = "Allow"
    protocol                   = "Tcp"
    source_port_range          = "*"
    destination_port_range     = "22"
    source_address_prefix      = "*"
    destination_address_prefix = "10.0.1.0/24"
  }

  security_rule {
    name                       = "web"
    priority                   = 1080
    direction                  = "Inbound"
    access                     = "Allow"
    protocol                   = "Tcp"
    source_port_range          = "*"
    destination_port_range     = "80"
    source_address_prefix      = "*"
    destination_address_prefix = "10.0.1.0/24"
  }
}

# Associate the Network Security Group to the subnet to allow the
# Network Security Group to control the traffic to and from the subnet
resource "azurerm_subnet_network_security_group_association" "example" {
  subnet_id                 = azurerm_subnet.example.id
  network_security_group_id = azurerm_network_security_group.example.id
}

# Create Public IPs to route traffic from the Load Balancer
# to the Virtual Machines in the Backend Pool
resource "azurerm_public_ip" "example" {
  count               = 2
  name                = "${var.public_ip_name}-${count.index}"
  location            = azurerm_resource_group.example.location
  resource_group_name = azurerm_resource_group.example.name
  allocation_method   = "Static"
  sku                 = "Standard"
}

# Create a NAT Gateway for outbound internet access of the 
# Virtual Machines in the Backend Pool of the Load Balancer
resource "azurerm_nat_gateway" "example" {
  name                = var.nat_gateway
  location            = azurerm_resource_group.example.location
  resource_group_name = azurerm_resource_group.example.name
  sku_name            = "Standard"
}

# Associate one of the Public IPs to the NAT Gateway to route
# traffic from the Virtual Machines to the internet
resource "azurerm_nat_gateway_public_ip_association" "example" {
  nat_gateway_id       = azurerm_nat_gateway.example.id
  public_ip_address_id = azurerm_public_ip.example[0].id
}

# Associate the NAT Gateway to subnet to route 
# traffic from the Virtual Machines to the internet
resource "azurerm_subnet_nat_gateway_association" "example" {
  subnet_id      = azurerm_subnet.example.id
  nat_gateway_id = azurerm_nat_gateway.example.id
}

# Create Network Interfaces
# The Network Interfaces will be associated with the
# Virtual Machines created later
resource "azurerm_network_interface" "example" {
  count               = 3
  name                = "${var.network_interface_name}-${count.index}"
  location            = azurerm_resource_group.example.location
  resource_group_name = azurerm_resource_group.example.name

  ip_configuration {
    name                          = "ipconfig-${count.index}"
    subnet_id                     = azurerm_subnet.example.id
    private_ip_address_allocation = "Dynamic"
    primary                       = true
  }
}

# Create Azure Bastion for accessing the Virtual Machines
# The Bastion Host will be used to access the Virtual 
# Machines in the Backend Pool of the Load Balancer
resource "azurerm_bastion_host" "example" {
  name                = var.bastion_name
  location            = azurerm_resource_group.example.location
  resource_group_name = azurerm_resource_group.example.name
  sku                 = "Standard"

  ip_configuration {
    name                 = "ipconfig"
    subnet_id            = azurerm_subnet.bastion.id
    public_ip_address_id = azurerm_public_ip.example[1].id
  }
}

# Associate Network Interface to the Backend Pool of the Load Balancer
# The Network Interface will be used to route traffic to the Virtual
# Machines in the Backend Pool
resource "azurerm_network_interface_backend_address_pool_association" "example" {
  count                   = 2
  network_interface_id    = azurerm_network_interface.example[count.index].id
  ip_configuration_name   = "ipconfig-${count.index}"
  backend_address_pool_id = azurerm_lb_backend_address_pool.example.id
}

# Generate a random password for the VM admin users
resource "random_password" "example" {
  length  = 16
  special = true
  lower   = true
  upper   = true
  numeric = true
}

# Create three Virtual Machines in the Backend Pool of the Load Balancer 
resource "azurerm_linux_virtual_machine" "example" {
  count                 = 3
  name                  = "${var.virtual_machine_name}-${count.index}"
  location              = azurerm_resource_group.example.location
  resource_group_name   = azurerm_resource_group.example.name
  network_interface_ids = [azurerm_network_interface.example[count.index].id]
  size                  = var.virtual_machine_size

  os_disk {
    name                 = "${var.disk_name}-${count.index}"
    caching              = "ReadWrite"
    storage_account_type = var.redundancy_type
  }

  source_image_reference {
    publisher = "Canonical"
    offer     = "0001-com-ubuntu-server-jammy"
    sku       = "22_04-lts-gen2"
    version   = "latest"
  }

  admin_username                  = var.username
  admin_password                  = coalesce(var.password, random_password.example.result)
  disable_password_authentication = false

}

# Enable virtual machine extension and install Nginx
# The script will update the package list, install Nginx,
# and create a simple HTML page
resource "azurerm_virtual_machine_extension" "example" {
  count                = 2
  name                 = "Nginx"
  virtual_machine_id   = azurerm_linux_virtual_machine.example[count.index].id
  publisher            = "Microsoft.Azure.Extensions"
  type                 = "CustomScript"
  type_handler_version = "2.0"

  settings = <<SETTINGS
{
 "commandToExecute": "sudo apt-get update && sudo apt-get install nginx -y && echo \"Hello World from $(hostname)\" > /var/www/html/index.html && sudo systemctl restart nginx"
}
SETTINGS

}

# Create an Internal Load Balancer to distribute traffic to the
# Virtual Machines in the Backend Pool
resource "azurerm_lb" "example" {
  name                = var.load_balancer_name
  location            = azurerm_resource_group.example.location
  resource_group_name = azurerm_resource_group.example.name
  sku                 = "Standard"

  frontend_ip_configuration {
    name                          = "frontend-ip"
    subnet_id                     = azurerm_subnet.example.id
    private_ip_address_allocation = "Dynamic"
  }
}

# Create a Backend Address Pool for the Load Balancer
resource "azurerm_lb_backend_address_pool" "example" {
  loadbalancer_id = azurerm_lb.example.id
  name            = "test-pool"
}

# Create a Load Balancer Probe to check the health of the 
# Virtual Machines in the Backend Pool
resource "azurerm_lb_probe" "example" {
  loadbalancer_id = azurerm_lb.example.id
  name            = "test-probe"
  port            = 80
}

# Create a Load Balancer Rule to define how traffic will be
# distributed to the Virtual Machines in the Backend Pool
resource "azurerm_lb_rule" "example" {
  loadbalancer_id                = azurerm_lb.example.id
  name                           = "test-rule"
  protocol                       = "Tcp"
  frontend_port                  = 80
  backend_port                   = 80
  disable_outbound_snat          = true
  frontend_ip_configuration_name = "frontend-ip"
  probe_id                       = azurerm_lb_probe.example.id
  backend_address_pool_ids       = [azurerm_lb_backend_address_pool.example.id]
}

Create a file named variables.tf and insert the following code.

variable "resource_group_location" {
  type        = string
  default     = "eastus"
  description = "Location of the resource group."
}

variable "resource_group_name_prefix" {
  type        = string
  default     = "rg"
  description = "Prefix of the resource group name that's combined with a random ID so name is unique in your Azure subscription."
}

variable "username" {
  type        = string
  default     = "azureadmin"
  description = "The username for the local account that will be created on the new VM."
}

variable "password" {
  type        = string
  default     = ""
  description = "The password for the local account that will be created on the new VM. If left blank, a random password is generated."
}

variable "virtual_network_name" {
  type        = string
  default     = "test-vnet"
  description = "Name of the Virtual Network."
}

variable "subnet_name" {
  type        = string
  default     = "test-subnet"
  description = "Name of the subnet."
}

variable "network_security_group_name" {
  type        = string
  default     = "test-nsg"
  description = "Name of the Network Security Group."
}

variable "network_interface_name" {
  type        = string
  default     = "test-nic"
  description = "Name of the Network Interface."
}

variable "public_ip_name" {
  type        = string
  default     = "test-pip"
  description = "Name of the Public IP."
}

variable "nat_gateway" {
  type        = string
  default     = "test-nat"
  description = "Name of the NAT gateway."
}

variable "bastion_name" {
  type        = string
  default     = "test-bastion"
  description = "Name of the Bastion."
}

variable "virtual_machine_name" {
  type        = string
  default     = "test-vm"
  description = "Name of the Virtual Machine."
}

variable "virtual_machine_size" {
  type        = string
  default     = "Standard_B2s"
  description = "Size or SKU of the Virtual Machine."
}

variable "disk_name" {
  type        = string
  default     = "test-disk"
  description = "Name of the OS disk of the Virtual Machine."
}

variable "redundancy_type" {
  type        = string
  default     = "Standard_LRS"
  description = "Storage redundancy type of the OS disk."
}

variable "load_balancer_name" {
  type        = string
  default     = "test-lb"
  description = "Name of the Load Balancer."
}

Create a file named outputs.tf and insert the following code.

output "resource_group_name" {
  value = azurerm_resource_group.example.name
}

output "private_ip_address" {
  value = "http://${azurerm_lb.example.private_ip_address}"
}

output "vm_password" {
  value     = azurerm_linux_virtual_machine.example[0].admin_password
  sensitive = true
}

Important

If you're using the 4.x azurerm provider, you must explicitly specify the Azure subscription ID to authenticate to Azure before running the Terraform commands.

One way to specify the Azure subscription ID without putting it in the providers block is to specify the subscription ID in an environment variable named ARM_SUBSCRIPTION_ID.

For more information, see the Azure provider reference documentation.

Initialize Terraform

Run terraform init to initialize the Terraform deployment. This command downloads the Azure provider required to manage your Azure resources.

terraform init -upgrade

Key points:

The -upgrade parameter upgrades the necessary provider plugins to the newest version that complies with the configuration's version constraints.

Create a Terraform execution plan

Run terraform plan to create an execution plan.

terraform plan -out main.tfplan

Key points:

The terraform plan command creates an execution plan, but doesn't execute it. Instead, it determines what actions are necessary to create the configuration specified in your configuration files. This pattern allows you to verify whether the execution plan matches your expectations before making any changes to actual resources.
The optional -out parameter allows you to specify an output file for the plan. Using the -out parameter ensures that the plan you reviewed is exactly what is applied.

Apply a Terraform execution plan

Run terraform apply to apply the execution plan to your cloud infrastructure.

terraform apply main.tfplan

Key points:

The example terraform apply command assumes you previously ran terraform plan -out main.tfplan.
If you specified a different filename for the -out parameter, use that same filename in the call to terraform apply.
If you didn't use the -out parameter, call terraform apply without any parameters.

Verify the results

Display the Azure resource group name.

terraform output -raw resource_group_name

Optionally, display the VM (virtual machine) password.
```
terraform output -raw vm_password
```

Display the frontend private IP address.

terraform output -raw private_ip_address

Log in to the VM that isn't associated with the backend pool of the load balancer using Bastion.
Run the curl command to access the custom web page of the Nginx web server using the frontend private IP address of the load balancer.
```
curl http://<Frontend IP address>
```

Clean up resources

When you no longer need the resources created via Terraform, do the following steps:

Run terraform plan and specify the destroy flag.
```
terraform plan -destroy -out main.destroy.tfplan
```
Key points:
- The terraform plan command creates an execution plan, but doesn't execute it. Instead, it determines what actions are necessary to create the configuration specified in your configuration files. This pattern allows you to verify whether the execution plan matches your expectations before making any changes to actual resources.
- The optional -out parameter allows you to specify an output file for the plan. Using the -out parameter ensures that the plan you reviewed is exactly what is applied.
Run terraform apply to apply the execution plan.
```
terraform apply main.destroy.tfplan
```

Troubleshoot Terraform on Azure

Troubleshoot common problems when using Terraform on Azure

Next steps

What is Azure Load Balancer?

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Quickstart: Create an internal load balancer to load balance internal traffic to VMs using Terraform

Prerequisites

Implement the Terraform code

Initialize Terraform

Create a Terraform execution plan

Apply a Terraform execution plan

Verify the results

Clean up resources

Troubleshoot Terraform on Azure

Next steps

Feedback

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