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We consider the problem of QoS-based partitioning of traffic streams for a link model with adjustable service levels. Specifically, we consider a link model with variable service levels which may be mapped to a finite number of MPLS Label- Switched-Paths (LSPs). Our target is to partition a set of traffic streams each with arbitrary local QoS-demand into a small number of classes and find the service level for each class while optimizing the residual-allocated-resources as a result of the traffic partitioning. The residual allocated resources will be measured by the service quantization overhead which is the summation of the differences between the required QoS and the offered service level for all traffic streams. We formulate the partitioning process as a Dynamic Programming problem. We then present two polynomial time algorithms to obtain the QoSbased optimal partition with bandwidth allocation. Our results indicate that using 4 or 5 service levels will accomplish the tradeoff between complexity and granularity irrespective of the distribution of the QoS requirements.