In this paper we develop an analysis of the so-called Dual Cell Spacer. In contrast to a conventional spacer, which shapes a traffic stream only according to a given Peak Cell Rate, the Dual Cell Spacer takes into account the Peak Cell Rate as well as the Sustainable Cell Rate with the corresponding Burst Tolerance. The analysis is carried out in the discrete-time domain. Performance measures such as the cell rejection probability, the cell delay distribution and the cell inter-departure time distribution are derived. All results are of an exact nature. Numerical examples that compare the performance of the Dual Cell Spacer with that of a conventional spacer show a similar performance in terms of cell delay and cell loss for relatively small values of the Burst Tolerance. Using our analysis, both the Sustainable Cell Rate and the Burst Tolerance, which are used for traffic shaping in the Dual Cell Spacer, can be chosen adequately to achieve a given target cell rejection probability or cell delay, respectively, and to allow the network provider to obtain a high multiplexing gain.