A method, system, and program for dynamic memory management of unallocated memory in a logical partitioned data processing system. A logical partitioned data processing system typically includes multiple memory units, processors, I/O adapters, and other resources enabled for allocation to multiple logical partitions. A partition manager operating within the data processing system manages allocation of the resources to each logical partition. In particular, the partition manager manages allocation of a first portion of the multiple memory units to at least one logical partition. In addition, the partition manager manages a memory pool of unallocated memory from among the multiple memory units. Responsive to receiving a request for a memory loan from one of the allocated logical partitions, a second selection of memory units from the memory pool is loaned to the requesting logical partition. The partition manager, however, is enabled to reclaim the loaned selection of memory units from the requesting logical partition at any time.