>Excel allows to hide a sheet. Then, we can click on any sheet and select Unhide to make that previous sheet visible again. What I need to do is password protect the unhide functionality. What would be the best practive to achieve that?

You can set the visible property to VeryHidden which can only be changed through VBA. Write a couple of Subs to turn the veryhidden property on and off:
Sub Hide_Sheet2
Sheets(“Sheet2”).Visible = 2
End Sub

Sub Show_Sheet2
Sheets(“Sheet2”).Visible = -1
End Sub