This paper presents a new scalable buffer-management scheme for IP Differentiated Services. The scheme consists of a Dif-ferentiated Random Drop (DRD) algorithm using feedback from a virtual scheduler. DRD choses a queue to perform an early packet drop to avoid congestion according to a specific probability function. First it will be shown that DRD in conjunction with first-come first-served scheduling is able to support relative service differentiation. The virtual scheduler is introduced to enable service differentiation in terms of bandwidth and delay at the same time. A virtual sched-uler runs in parallel to the real scheduler and maintains virtual queue lengths that are being used by the congestion avoidance scheme as a feedback for packet drop decisions. Scheduling packets for transmis-sion is performed by the real scheduler only.