Aiming at solving the problem of frequency scarcity in dense IEEE 802.11 wireless local area networks (WLANs), a novel channel assignment scheme is proposed in this paper where we explore the partially overlapped channels for additional frequency resources. In our proposed algorithm, we first introduce a user number estimation algorithm at physical layer where the number of users is determined by the number of different channel impulse responses (CIRs). Then, the IEEE 802.11 channels are allocated to the users in a distributed way with the purpose of maximizing system capacity using the information of the number of users for each channel. The interferences caused by the channel partial overlap are mathematically evaluated and involved in the channel assignment. Simulations verify that the proposed algorithm can estimate the number of users accurately while at the same time, significantly improving the system performance.