In this paper, a Modified RED algorithm for congestion avoidance in IP networks is presented. The RED detects incipient congestion by computing the average queue size. By notifying only a randomly selected fraction of connection, it causes to the global synchronization or fairness problem, And also, the network characteristics need to be known in order to find th optimum average queue length. When the average queue size exceeds a minimum threshold, a modified RED algorithm drops packets based on the state of each connection. Performance is improved because of keeping the average queue size low while allowing occasional bursts of packets in the queue, we compare performance of modified RED with RED and Drop Tail in terms of goodput, network utilization and fairness.