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A new dynamic frame slotted ALOHA algorithm used in Radio Frequency Identification (RFID) systems is presented in this paper. An effective tag-grouping method is proposed in the algorithm. Theoretical analysis shows that the tag-grouping method can disperse tags quickly and evenly. Based on tag grouping, a reader in RFID system can identify tags group by group. The simulation results show that the algorithm can maintain the efficiency near the theoretical maximum of the FSA algorithm, and the efficiency of the algorithm is higher than other typical DFSA algorithms.