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A resource allocation algorithm for variable bit rate (VBR) sources using the dynamic reservation TDMA (DR-TDMA) medium access control protocol is proposed in this paper, DR-TDMA combines the advantages of distributed access and centralized scheduling to multiplex VBR traffic efficiently over a wireless ATM channel, and can be easily extended to integrate constant bit rate, VBR, and available bit rate traffic. We present a novel rate based scheduling algorithm which maintains in the base station a virtual status of the access queue in each mobile to control channel access by the mobile. A unique cell control algorithm is incorporated to provide guaranteed or best effort service to each VBR source depending on whether the current cells conform to the traffic contract. Simulation results show that DR-TDMA can achieve a high throughput in the range of 93 to 98% while maintaining a reasonable quality of service.