System and method for implementing source based and egress based virtual networks in an interconnection network

An interconnection network, particularly a Gamma graph network, comprising a number of interconnected routers implementing source based and egress based virtual networks in order to prevent tree saturation and deadlock while routing packets. The interconnection network can be used as a fabric within a multi-application switch router, for example. Packets traverse the fabric from any packet source to any packet destination by traversing a source based virtual network associated with a packet source and then by traversing an egress based virtual network associated with a packet destination. By partitioning the fabric into source based virtual networks and egress based virtual networks, the number of control structures required to manage them are reduced as compared with destination based virtual network architectures. Furthermore, by dynamically assigning buffer resources to a virtual network when needed provides more efficient utilization of buffer resources as opposed to dedicated assignment of buffer resources to each virtual network.