I'm following the below link to configure Linux server as Router.
I would like to know if the Linux server will behave as actual router i.e. Suppose if it receives a packet whose MTU size is greater than next hop, it will drop the packet ?
The server will not necessarily drop the packet. It will fragment it, unless the Don't Fragment bit is set. In this case it will respond with a Destination Unreachable ICMP message.