TCP suffers from low performance over asynchronous transfer mode (ATM) networks. This is mainly because during phases of congestion, ATM drops cells without taking into account the effect this has on the upper layer protocols. Two main algorithms, called partial packet discard (PPD) and early packet discard (EPD), were proposed in the past for improving TCP performance. However, they address one aspect of the problem that has only small effect on the ®nal performance. In this paper we propose an enhanced method for packet discard, called balanced packet discard (BPD) that improves TCP performance dramatically on congested networks and guarantees fairness among multiple connections. We will show that BPD increases TCP throughput by more than 25% compared to EPD/PPD. q 2001 Elsevier Science B.V. All rights reserved.