A dynamic scaling (DS) method is proposed as a cost-effective means of eliminating overflow and limit cycle oscillations in fixed-point direct-form recursive filters. It is implemented by adding a DS unit to a fixed-point on-line module without modifying latter. On-line modules consume inputs and produce outputs digit serially, most significant digit first. The DS method introduces a shared exponent into the fixed-point computation at reasonable cost. Implementation in a 1.5 gate array shows that the DS method is twice as cost effective as the previously known precision extension method. The need for scaling between filter sections is also eliminated.