A distributed dynamic channel allocation algorithm for a multi-carrier CDMA cellular system having at least one mobile base station. The distributed dynamic channel allocation algorithm uses channel power measurements from both the requesting mobile station and the mobile base station attempting to allocate an available resource to the mobile station. The distributed dynamic channel allocation algorithm attempts to allocate the best available resource for the requesting mobile station, in terms of interference, while minimizing the amount of interruption that the allocated resource may cause to existing connections in neighboring cells. Thus, the distributed dynamic channel allocation algorithm follows a "least-interference, least-interruption" strategy. The distributed dynamic channel allocation algorithm is load balancing, since it tends to assign new resources to mobile base station with lighter loads.