This paper proposes a dynamic bandwidth allocation algorithm that improves the network performance and bandwidth sharing efficiency in the upstream channels of a hybrid passive optical network (PON) that combines a fiber-to-the-home (FTTH) access network and wireless sensor networks (WSNs). The algorithm is called the adaptive limited dynamic bandwidth allocation (ALDBA) algorithm. Unlike existing algorithms, the ALDBA algorithm is not limited to controlling just FTTH access networks, it also supports WSNs. For the proposed algorithm, we investigate the difference in the lengths of generated data packets between the FTTH terminals and sensor nodes of WSN to effectively evaluate the end-to-end average packet delay, bandwidth utilization, time jitter, and upstream efficiency. Two variants of the proposed algorithm and a limited service (LS) scheme, which is an existing well-known algorithm, are compared under non-uniform traffic conditions without taking into consideration priority scheduling. We demonstrate the proposed scheme through simulation by generating a realistic network traffic model, called self-similar network traffic. We conducted a detailed simulation using several performance parameters to validate the effectiveness of the proposed scheme. The results of the simulation showed that both ALDBA variants outperformed the existing LS scheme in terms of average packet delay, bandwidth utilization, jitter, and upstream efficiency for both low and high traffic loads.