— In this paper, we consider a source rate control scheme for a finite buffer of size C in a medium access control layer of a wireless system over a Markovian channel. Our rate control scheme can reduce the mean number of packets produced by a source when the queue length exceed K (K<C), and increase again (by recovering the original source rate) when the queue length drops below L (L<K). In order to obtain the stationary state probability vector of the system which is no longer a typical M/G/1 type queue, we propose an algorithm consisting of two phases. During the backward reduction phase, we obtain a minimal finite M/G/1 queue with an invariant probability vector called the minimal solution vector. This is followed by a forward expansion phase on the minimal solution vector. Numerical results are presented in terms of cumulative queue length distribution, by varying source and channel parameters and the hysteresis levels, L and K.