Method and system for assigning labels in a data transmission network in which flows of data, composed of packets, are transmitted from a source node to a destination node through a plurality of switching nodes. The network is further characterized in that a label, identifying each flow of data, is added to each packet of the flow of data before the packet is transmitted from a transmitting node to an adjacent receiving node in the network. This so-called identification label is recognized by the receiving node as the identification of the flow of data to be transmitted. Each node in the network assigns an identification label to the packets when a new flow of data is received by the node. Both the transmitting and receiving nodes in the network generate an identical label for a given flow of data. Thus, the overhead associated with the sending of assigned labels from assigning nodes to corresponding upstream or downstream transmitting or receiving nodes in the network is avoided.