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In this paper a novel Fuzzy-based proportional-integral derivative (PID) controller, which acts as an active queue manager (AQM) for Internet routers, is proposed. These controllers are used to reduce packet loss and improve network utilization in TCP/IP networks. The TCP/IP network is modeled as a time-delayed system with a saturated input. This is because of limitations of packet dropping probability and effects of propagation delays in TCP/IP networks. An improved Fuzzy algorithm is employed to derive optimal or near optimal PID control gains such that the error between the router queue length and the desired queue length is minimized. Basically, in this new methodology, the classical PID and fuzzy controller have been combined by a blending mechanism which depends on a certain function of actuating error. Simulation results show that for the same link utilization, the new hybrid fuzzy PID controller provides better performance than random early detection (RED) and PID controllers.