Method and system for facilitating tunnel management in the 3G-WLAN interworking systems providing dynamic configuration of maximum number of IP Security Protocol (IPsec) tunnels allowed per Internet Key Exchange (IKE) Security Association (SA) at the Packet Data Gateway (PDG) during the initial tunnel establishment procedure. Authentication Authorization and Accounting (AAA) server is notified of the new IPsec tunnel established between the user equipment (UE) and the PDG.