This paper reports the world-first system-level demonstration of dynamic wavelength allocation (DWA) on a wavelength-tunable (λ-tunable) wavelength division multiplexing/time division multiplexing-passive optical network (WDM/TDM-PON). To achieve DWA, a DWA calculation is necessary that determines new optical network unit assignments to the optical line terminal ports according to the bandwidth demand. In addition, a wavelength-tuning (λ-tuning) sequence that induces no data-frame loss, i.e., a hitless λ-tuning sequence, is essential. First, we propose a bidirectional hitless λ-tuning sequence and investigate its feasibility using media access control boards that we developed for symmetric 40-Gbit/s λ-tunable WDM/TDM-PONs, which are also the world's first. Then, with a DWA calculation according to the downstream traffic loads, we show automatic dynamic load-balancing operation.Index Terms-Dynamic wavelength allocation (DWA), optical access network, optical access system, passive optical network (PON), wavelength division multiplexing/time division multiplexing-passive optical network (WDM/TDM-PON).