A method of implementing dynamic channel allocation in a cellular radio system. The cellular radio system includes, in each cell, at least one base station communicating with subscriber terminals within its area. The system includes, in one cell, at least two subeeils, which include an anrenna unit and in which all available frequencies are dynamically used. All antenna units listen to control channels that subscriber terminals use for connection set-up and a base station measures the power level of the control channels through the antenna units, on the basis of which an antenna unit providing the strongest sigxzal is selected for conricction set-up. The base station measures through the antenna units the interference level of all available traffic channels, on the basis of which that traffic channel in an antenna unit selected for connection set-up which has the least interference is selected for communication. The base station measures through the antenna units the power level of the signals of subscriber terminals having a uaffic connection.
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