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Mobile IP is a simple and scalable global mobility solution. However, it may cause excessive signaling traffic and long signaling delay. Mobile IP regional registration is proposed to reduce the number of location updates to the home network and to reduce the signaling delay. This paper introduces a novel distributed and dynamic regional location management for Mobile IP where the signaling burden is evenly distributed and the regional network boundary is dynamically adjusted according to the up-to-date mobility and traffic load for each terminal. In our distributed system, each user has its own optimized system configuration which results in the minimal signaling traffic. In order to determine the signaling cost function, a new discrete analytical model is developed which captures the mobility and packet arrival pattern of a mobile terminal. This model does not impose any restrictions on the shape and the geographic location of subnets in the Internet. Given the average total location update and packet delivery cost, an iterative algorithm is then used to determine the optimal regional network size. Analytical results show that our distributed dynamic scheme outperforms the IETF Mobile IP regional registration scheme for various scenarios in terms of reducing the overall signaling cost.