Advances in network management and switching technologies make dynamic bandwidth allocation of logical networks built on top of a physical network possible. Previous proposed dynamic bandwidth allocation algorithms are based on simplified network model. The analytical model is valid only under restrictive assumptions. Infinitesimal perturbation analysis, a technique which estimates the gradients of the functions in discrete event dynamic systems by passively observing the system, is used to estimate delay sensitivities under general traffic patterns. A new dynamic bandwidth allocation algorithm using on-line sensitivity estimation is proposed. Simulation results show that the approach further improves network performance. Implementation of the proposed algorithm in operational networks is also discussed. >