In cellular networks, it is vital to allocate communication channels efficiently because the bandwidth allocated for cellular communication is limited. When mobile hosts move from one cell to another cell, to provide uninterrupted service, the new cell should have enough channels to support the ongoing communication of the mobile hosts that moved into the cell. If channels are statically allocated, a cell may run out of channels when large number of mobile hosts moves to a cell, thus degrading the quality of service. To overcome this problem, dynamic channel allocation approaches have been proposed which allocate channels to cells on demand, thus increasing channel utilization and hence improving the quality of service. A distributed dynamic channel allocation algorithms gained a lot of attention due to their high reliability and scalability. The cell that wants to borrow a channel has to wait for replies from all its interference neighbors and hence, is not fault-tolerant. This work aims to propose a Distributed dynamic channel allocation algorithm to make use of the available channel efficiently. It can tolerate the failure of mobile nodes as well as static nodes and enhance the quality of service by making efficient reuse of channels. This paper proposes a channel allocation scheme with efficient bandwidth reservation, which initially reserves some channels for handoff calls, and later reserves the channels dynamically, based on the user mobility The results indicate that the proposed channel allocation scheme exhibits better performance by considering the above mentioned user mobility, type of cells, and maintaining of the queues for various traffic sources. In addition, it can be observed that our approach reduces the dropping probability by using reservation factor.