The Internet of Things (IoT) is rapidly growing, with an estimated 14.4 billion active endpoints in 2022 and a forecast of approximately 30 billion connected devices by 2027. This proliferation of IoT devices has come with significant security challenges, including intrinsic security vulnerabilities, limited computing power, and the absence of timely security updates. Attacks leveraging such shortcomings could lead to severe consequences, including data breaches and potential disruptions to critical infrastructures. In response to these challenges, this research paper presents the IoT Proxy, a modular component designed to create a more resilient and secure IoT environment, especially in resource-limited scenarios. The core idea behind the IoT Proxy is to externalize security-related aspects of IoT devices by channeling their traffic through a secure network gateway equipped with different Virtual Network Security Functions (VNSFs). Our solution includes a Virtual Private Network (VPN) terminator and an Intrusion Prevention System (IPS) that uses a machine learning-based technique called oblivious authentication to identify connected devices. The IoT Proxy’s modular, scalable, and externalized security approach creates a more resilient and secure IoT environment, especially for resource-limited IoT devices. The promising experimental results from laboratory testing demonstrate the suitability of IoT Proxy to secure real-world IoT ecosystems.