In the method for dynamic IP allocation using a mobile IP in a wireless portable Internet system, a MAC message used to register a mobile subscriber station contains a flag including a mobile IP version parameter. Upon checking the mobile IP version, the mobile subscriber terminal transmits a mobile IP registration request message to a base station during MAC connection establishment. The base station transmits a mobile IP registration reply message to the mobile subscriber in response to the received mobile IP registration request message to allocate a dynamic IP address to the mobile subscriber station. The dynamic IP allocation process is performed through a secondary management connection to achieve a rapid handoff without using a connection identifier. In addition, the present invention supports a seamless service and the use of the mobile IP in the IEEE 802.16e wireless