Setting a serial connection between two routers using PPP with CHAP authentication:

Set PC0: IP 192.168.1.2, gateway 192.168.1.1
Set PC1: IP 192.168.2.2, gateway 192.168.2.1
Issue the following commands in Router0:
enable configure terminal hostname Router0 no ip domain lookup line con 0 logging synchronous interface g0/0 ip address 192.168.1.1 255.255.255.0 no shutdown interface s0/0/0 ip address 10.1.1.1 255.255.255.0 no shutdown
Then in Router1:
enable configure terminal hostname Router1 no ip domain lookup line con 0 logging synchronous interface g0/0 ip address 192.168.2.1 255.255.255.0 no shutdown interface s0/0/0 ip address 10.1.1.2 255.255.255.0 no shutdown
Setting up the routing protocol (OSPF in this case):
router ospf 1 network 192.168.1.0 0.0.0.255 area 0 network 10.1.1.0 0.0.0.255 area 0 passive-interface G0/0
Note: use 1 in the bolded octet for Router0 and 2 for Router1.
You should now be able to ping between any two devices.
Next, set the encapsulation type to PPP and enable CHAP authentication.
In Router0:
username Router1 password cisco interface s0/0/0 encapsulation ppp ppp authentication chap
In Router1:
username Router0 password cisco interface s0/0/0 encapsulation ppp ppp authentication chap
Note: each router defines a user entry for the other router. Replace “cisco” with your desired password.
Check connectivity. If needed, shut the interface down and bring it back up to speed up the process.
Relevant debugging commands:
debug ppp negotiation debug ppp packet debug ppp negotiation debug ppp packet debug ppp authentication undebug all