A reference model is a virtual model which defines how communication should take place. It logically divides the processes which are required for the communication into layers. This concept is known as layered architecture. A network reference model helps the users understand the functions of communication software which relate to network product development activities. It also provides the basic scheme for creating and implementation of network devices. This paper explains the 2 popular reference models: OSI reference model and TCP/IP model, by comparing the functionality of each layer in both models.