A method and apparatus for updating an access network discovery and selection functions (ANDSF) policy in a wireless communication system is provided. A user equipment (UE) receives the ANDSF policy and radio access network (RAN) assistance information for the ANDSF policy and a RAN rule, and further receives a configuration indicating whether both the ANDSF policy and the RAN rule are utilized for access network selection and traffic routing. Only if the received configuration indicates that the RAN rule is not utilized for the access network selection and traffic routing, the UE updates the ANDSF policy based on the received RAN assistance information, and performs the access network selection and traffic routing based on the received configuration.