Path optimization in distributed service chains in a network environment

An example method for path optimization in distributed service chains in a network environment is provided and includes receiving information about inter-node latency of a distributed service chain in a network environment comprising a distributed virtual switch (DVS), where the inter-node latency is derived at least from packet headers of respective packets traversing a plurality of service nodes comprising the distributed service chain, and modifying locations of the service nodes in the DVS to reduce the inter-node latency. In specific embodiments, the method further includes storing and time-stamping a path history of each packet in a network service header portion of the respective packet header. A virtual Ethernet Module (VEM) of the DVS stores and time-stamps the path history and a last VEM in the distributed service chain calculates runtime traffic latencies from the path history and sends the calculated runtime traffic latencies to a virtual supervisor module.