In an IEEE 802.16 network, mobile stations locating different places will encounter various interferences during transmission, leading that their communication channels experience different packet loss conditions and adopt suitable modulations. Thus, an excellent bandwidth allocation algorithm should not only satisfy various Quality of Services (QoS) required by heterogeneous traffic, but also consider the channel quality to maximize bandwidth utilization. In this paper, a bandwidth allocation algorithm with channel quality awareness and QoS guarantee, called CQQ, is proposed. Besides satisfying each connection's QoS requirement, CQQ raises the throughput by dynamically adjusting the Downlink/Uplink (DL/UL) bandwidth to match current DL/UL traffic and allocating more bandwidth to the connections having better channel quality. Simulation results demonstrate that CQQ provides lower delay violation ratio and higher goodput, comparing with the previous algorithms.