Over the past years the use of digital devices has increased heavily, and home networks continue to grow in size and complexity. By the use of virtualized residential gateways, advanced functionality can be moved away from the home and thereby decrease the administrative burden for the home user. Using virtualizing residential gateways instead of physical devices creates new challenges. This project is looking in to how the choice of virtualization technology impacts performance and security by investigating operating system level virtualization in contrast to full virtualization for use in home residential gateways. Results show that operating system level virtualization uses fewer resources in terms of disk, memory, and processor in virtualized residential gateways. The results also show that with choice of setups and virtualization technologies different security issues arises, which has been analyzed in lab environment. Recommendations regarding solutions to security issues are proposed in the concluding parts of this thesis.