In this paper, a priority-based wavelength assignment algorithm, Dynamic Threshold Method (DTM), is proposed. A set of wavelengths, Preferred Wavelength Set (PWS), is pre-allocated for each priority request. Based on the usage of wavelength in the PWS of a priority request, a threshold is dynamically calculated to decide whether the wavelengths for the higher priority request can be allocated to the lower. By using DTM, the blocking probability of the high priority request is guaranteed to be a lower degree, and at the same time performance of the low priority request is improved. So the network's average blocking probability is minimized. Simulation results of the network performance show that the proposed algorithm performs well in different dynamic traffic load situation.