The rapid evolution of cellular technology and the more user demand for advanced mobile services leads the industry to develop more efficient network structures. The increasing number of cellular subscribers and the demand for cellular networks communication (3rd and 4th generation) drives to the research of the new methodologies for the design of cellular networks and services. This thesis has been generated and complied with the objective of proposing GSM Network Utilizing DYNAMIC CHANNEL ALLOCATION starting with the architecture of GSM Network with system design. In next chapter we define the channels that are transmitted over the Air Interface, leading further towards the Channel Allocation Schemes in GSM. In this chapter we describe the various types of channels are used in GSM Network. Furthermore define the main two strategies for channel assignment, briefly differentiate between the FCA (Fixed Channel Allocation) and (Dynamic Channel Allocation) as well as advantages of both schemes. Then the major is study of (Dynamic Channel Allocation) and the proposed Algorithm for Dynamic Channel Allocation in GSM network is presented and discussed. All channels will placed in a pool and on demand or on request will be assigned to the user for that particular call that will be helpful to maintain the grade of service and increase system capacity.