Provided are a method and apparatus for dynamically managing hierarchical flows that more efficiently process packet traffic while maintaining compatibility with an existing packet data network in transferring both circuit traffic and packet traffic in a packet switched network. The method for dynamically managing hierarchical flows includes: receiving data packets, classifying the data packets according to attributes of the received data packets, and producing first flows; determining whether traffic of each of the first flows exceeds a predetermined bandwidth limit, and performing a packet drop process or producing second flows for first flows that exceed the bandwidth limit, according to a flow-specific policy; and performing second flow processing on the second flows according to a second flow policy. Only flows exceeding the bandwidth limit or causing congestion are hierarchically divided for management. This makes it possible to finely manage the flows without complex operations.