Abstract: In order to efficiently manage ATM network resources, a new dynamic bandwidth allocation scheme called minimum overflow traffic algorithm (MOTA) is proposed to assign the bandwidth b/sub i/ for each traffic class in ATM networks. An overflow traffic function Q is used to adjust the bandwidth assignment each time when a new connection is required. This algorithm sets the mean overflow traffic to bandwidth ratio in the system as the optimization object function Q and adjusts the bandwidth assignment to each traffic class by optimizing Q. The average virtual cell loss probability (VCLP) is employed to measure the quality of service. This novel approach can minimize the VCLP of the system by optimizing Q, utilize the link capacity efficiently and provide high throughput in a multi-class traffic environment.