Urban areas are currently facing challenges in terms of traffic congestion due to city expansion and population increase. In some cases, physical solutions are limited. For example, in certain areas it is not possible to expand roads or build a new bridge. Therefore, making public transpiration (PT) affordable, more attractive and intelligent could be a potential solution for these challenges. Accuracy in bus running time and bus arrival time is a key component of making PT attractive to ridership. In this thesis, a dynamic model based on Kalman filter (KF) has been developed to predict bus running time and dwell time while taking into account real-time road incidents. The model uses historical data collected by Automatic Vehicle Location system (AVL) and Automatic Passenger Counters (APC) system. To predict the bus travel time, the model has two components of running time prediction (long and short distance prediction) and dwell time prediction. When the bus closes its doors before leaving a bus stop, the model predicts the travel time to all downstream bus stops. This is long distance prediction. The model will then update the prediction between the bus’s current position and the upcoming bus stop based on real-time data from AVL. This is short distance prediction. Also, the model predicts the dwell time at each coming bus stop. As a result, the model reduces the difference between the predicted arrival time and the actual arrival time and provides a better understanding for the transit network which allows lead to have a good traffic management.