This paper presents an in-depth study of applying the bridging technology with layer-3 forwarding (L3F) in Wireless Local Area Networks (WLAN). L3F addresses a limitation of wireless communications at the Medium Access Control (MAC) layer, and uses the information at the network layer (IP address) to forward packets. It has the flexibility of IP routing without the complexity of routing and subnet configurations. The detailed procedure of L3F is presented in this paper, along with thorough performance analysis using a high capability traffic generator and analyzer. The performance results, as measured by throughput and latency, show that the L3F performance is comparable to traditional layer-2 bridging and significantly better than IP routing. This paper also presents two practical applications of using L3F: one is in the Small Office and Home Office (SOHO) to interconnect multiple LAN segments, and the other is in the multi-hop ad hoc wireless networks.