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Mobile IP is a solution for mobility on the global Internet. However, it does not extend well to highly mobile users. Mobile IP regional registration Is proposed to reduce the number of location updates to the home network, and reduce the signaling delay. This paper introduces an optimal regional location management mechanism for Mobile IP that results in the minimum signaling cost. A novel 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 Internet subnets. Given the average total location update and packet delivery cost, an iterative algorithm is then used to determine the optimal size of regional networks. Analytical results are also obtained to demonstrate how the optimal value changes under various parameters.