A media gateway and a method of managing a local channel thereof are provided. A main control processor selects one of at least one DSP in response to a call setup request and selects a TDM channel of the selected DSP. Then, the main control processor assigns a session number to the selected DSP in order to distinguish the call inside the selected DSP, and assigns a channel that is in an idle status among predetermined RTP available channels as an RTP channel for the call. The session number with respect to the TDM channel is assigned by the main control processor to the DSP if the main control processor selects the TDM channel of the DSP among a plurality of DSPs, each of which includes a plurality of TDM channels. The DSP stores the session number. A T-switch dynamically connects the plurality of TDM channels with a plurality of E1 links. The local DSPs of the media gateway can operate with only channel information necessary for the DSPs themselves without storing system-level channel information.