SUMMARYIn this paper, we propose a distributed cross‐layer resource allocation algorithm for wireless cooperative networks based on a network utility maximization framework. The algorithm provides solutions to relay selections, flow pass probabilities, transmit rate, and power levels jointly with optimal congestion control and power control through balancing link and physical layers such that the network‐wide utility is optimized. Via dual decomposition and subgradient method, we solve the utility‐optimal resource allocation problem by subproblems in different layers of the protocol stack. Furthermore, by introducing a concept of pseudochannel gain, we model both the primal direct logical link and its corresponding cooperative transmission link as a single virtual direct logical link to simplify our network utility framework. Eventually, the algorithm determines its primal resource allocation levels by employing reverse‐engineering of the pseudochannel gain model. Numerical experiments show that the convergence of the proposed algorithm can be obtained and the performance of the optimized network can be improved significantly. Copyright © 2012 John Wiley & Sons, Ltd.