Broadband networks based on ATM technology can carry a large volume of data and can support diverse services like audio, video, and data uniformly. The reliability and availability levels provided by such networks should be very high. Self-healing is an elegant concept in this direction to provide highly reliable networks. A self-healing network can detect failures such as link/node failures and reroute the failed connections automatically using distributed control mechanisms. In this paper, we consider link and node failures including the VP terminating nodes unlike Kawamura and Tokizawa (Self-healing in ATM networks based on virtual path concept, IEEE Journal on Selected Areas in Communications 12 (1) (1994) 120–127). We present here an improved scheme for self-healing in ATM networks based on the concept of backup VPs. The problems we address are: (i) self-healing scheme; and (ii) backup VP routing. Two issues are addressed in the self-healing scheme: (i) backup VP activation protocol; and (ii) dynamic backup VP routing. We propose a new backup VP activation protocol which uses a VC packing strategy which allows the fast and prioritized restoration of critical VCs that were carried by failed VPs. We also propose a distributed dynamic backup VP routing algorithm which reduces the resource contention that may occur when multiple source–destination pairs contend for the routes simultaneously. The objective of the backup VP routing problem is to find a backup VP for each of the working VPs so that the cost of providing the backup is minimized. We propose a heuristic based solution for the backup VP routing problem using the concept of minimum cost shortest paths. We conducted simulation experiments to evaluate the performance of the proposed schemes. The results show that the proposed schemes are effective. Comparison of the results with those of the earlier schemes (R. Kawamura, I. Tokizawa, Self-healing in ATM networks based on virtual path concept, IEEE Journal on Selected Areas in Communications 12 (1) (1994) 120–127; C.J. Hou, Design of a fast restoration mechanism for virtual path-based ATM networks, Proceedings of IEEE INFOCOM’97, Kobe, Japan, April 1997) shows that the proposed schemes perform better.