In this paper, an improved User Parameter Control (UPC) algorithm is proposed to control traffic in ATM networks. The algorithm consists of delay elements such as Cell Buffer, Red Token Pool, Green Token Pool, and Dynamic Spacer. The token here is used to control traffics rather than to arbitrate the contention of buses. A token is generated during a random time period, and the accumulated tokens are consumed one each time a cell arrives. At this time, if the delay element, named Dynamic Spacer, is empty, the cell comes into the network. On the other hand, if the Spacer is not empty, the cell cannot come into the network. In addition, in the case that tokens do not exist in Token Pool, the corresponding cell is thrown away. This research proposes new UPC Algorithm to improve the cell delay rate and cell loss rate by adopting Dynamic Spacer. The proposed algorithm dynamically controls traffic in ATM networks with respect to the various traffic status.