In this paper, we propose and evaluate three techniques for optimizing network performance in the Xen virtualized environment. Our techniques retain the basic Xen architecture of locating device drivers in a privileged `driver' domain with access to I/O devices, and providing network access to unprivileged `guest' domains through virtualized network interfaces. First, we redefine the virtual network interfaces of guest domains to incorporate high-level network offfload features available in most modern network cards. We demonstrate the performance benefits of high-level offload functionality in the virtual interface, even when such functionality is not supported in the underlying physical interface. Second, we optimize the implementation of the data transfer path between guest and driver domains. The optimization avoids expensive data remapping operations on the transmit path, and replaces page remapping by data copying on the receive path. Finally, we provide support for guest operating systems to effectively utilize advanced virtual memory features such as superpages and global page mappings. The overall impact of these optimizations is an improvement in transmit performance of guest domains by a factor of 4.4. The receive performance of the driver domain is improved by 35% and reaches within 7% of native Linux performance. The receive performance in guest domains improves by 18%, but still trails the native Linux performance by 61%. We analyse the performance improvements in detail, and quantify the contribution of each optimization to the overall performance.