In last decade, high bandwidth consumption of Peer to Peer (p2p) applications has resulted increased bandwidth demandand service quality issues for critical business applications. Past researchsuggestedthat traffic filtering of unwanted traffic and rate limitation of bandwidth hungry applications can result in fair distribution and optimization of available bandwidth. In this context we proposed and implemented internet traffic rate limiter and bandwidth optimizer based on FreeBSD (v8.1) operating system. The prioritized traffic flows throughput was increased by 5% and network latencywas reduced by9.5%, which improved quality of service of prioritized traffic flows.