Virtual Path (VP) provisioning has gained wide acceptance as an effective resource management technique for improving transmission efficiency in ATM networks. VP bandwidth management in particular could absorb short-term fluctuations in traffic and improve call-blocking probability. In this paper, we propose a distributed and dynamic VP bandwidth management scheme called DIDA, which absorbs medium scale traffic fluctuations and improves the call blocking probability. The proposed scheme incorporates an adaptive traffic estimator that is suitable even for VPs carrying heterogeneous traffic. Simulation studies conducted on DIDA show that the adaptive estimator of DIDA improves the call blocking probability in an ATM network, with VPs carrying heterogeneous traffic while maintaining fairness among different call types at the same time.