A method of implementing a fast dynamic channel allocation background interference reduction procedure in a wireless communication system includes a pre-code allocation process, a signal-independent code allocation process, and a post-code allocation process. The pre-code allocation process receives a timer trigger signal and retrieves system measurements from a centralized database. The physical resources to be reassigned are determined based on a figure of merit. The code allocation process checks the availability of a code set in the cell and generates timeslot sequences for the available timeslots. A code set is allocated to the available timeslots in a timeslot sequence, wherein a successful assignment is a solution. The interference signal code power (ISCP) is calculated for each solution and the solution having the lowest weighted ISCP is selected as an optimal solution. The reallocation information is stored in the centralized database and is sent in a physical channel reconfiguration request message.