Abstract: A method and system of managing virtual circuits for improved non-blocking fault tolerance in a multi-node virtual circuit network of resources is presented. On receiving a request for connection between two nodes in the multi-node network, a virtual circuit with a plurality of virtual circuit channels is set up between the two nodes. Each node may have more than one physical link equipped to it. Furthermore, the virtual circuit channel may be disconnected when there is no traffic between the nodes. A method for handling virtual circuit channel allocation and de-allocation that prevents conflicts in reuse of the channels before they are released by both nodes in the connection is also presented. A protocol to prevent race conditions between the nodes is also established providing improved bandwidth utilization in the multi-node network.