With the progress in optical transmission technology, the photonization of the access network is possible. The ATM based passive optical network (APON) is an ideal optical access-network solution that combines the ability of ATM supporting multi-rate, multi-service and the transparent broad-bandwidth transmission ability of the passive optical network. In this paper, we propose a novel distributed multi-level MAC protocol called DMSP, in which both OLT and ONU take part in the permit distribution procedure. The proposed MAC protocol supports diverse ATM service classes, such as CBR, rt-VBR, nrt-VBR, ABR, and UBR traffics and provides multi-priority. The result of computer simulation shows that the proposed MAC protocol is better than the normal priority control protocol in term of CDV performance.