In this paper we propose an improved hierarchy based mobility management scheme THMIP (Three-level Hierarchical Mobile IP) using fluid flow model to reduce the signaling overhead for a frequently moving mobile node (MN) within its hierarchical domain. In this scheme, the MN sends the binding update to the Home Agent (HA) only for the first time when the Care of address (CoA) gets changed. From the next movement onwards, it sends binding update to the previous Mobility Anchor Point (MAP). This results in reduction of cost both in Location Update and Packet Delivery. We compare our proposed protocol with other existing protocols such as Multi-Level HMIP, MIFA and P-MIP. We find that THMIP shows a considerable improved performance over the others in the context of Location Update and Packet Delivery.