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One of the major challenges for the wireless network design is the efficient mobility management, which can be addressed globally (macromobility) and locally (micromobility). Mobile Internet protocol (IP) is a commonly accepted standard to address global mobility of mobile hosts (MHs). It requires the MHs to register with the home agents (HAs) whenever their care-of addresses change. However, such registrations may cause excessive signaling traffic and long service delay. To solve this problem, the hierarchical mobile IP (HMIP) protocol was proposed to employ the hierarchy of foreign agents (FAs) and the gateway FAs (GFAs) to localize registration operations. However, the system performance is critically affected by the selection of GFAs and their reliability. In this paper, we introduce a novel dynamic hierarchical mobility management strategy for mobile IP networks, in which different hierarchies are dynamically set up for different users and the signaling burden is evenly distributed among the network. To justify the effectiveness of our proposed scheme, we develop an analytical model to evaluate the signaling cost. Our performance analysis shows that the proposed dynamic hierarchical mobility management strategy can significantly reduce the system signaling cost under various scenarios and the system robustness is greatly enhanced. Our analysis also shows that the new scheme can outperform the Internet Engineering Task Force mobile IP hierarchical registration scheme in terms of the overall signaling cost. The more important contribution is the novel analytical approach in evaluating the performance of mobile IP networks.