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IEEE 802.11-based wireless local area networks (WLANs) are one of the most popular mediums for interconnecting portable devices. All the devices (stations) communicating over WLANs share a common wireless channel. In order to avoid potential collisions an RTS-CTS handshake procedure is used to acquire the channel. However, most of the existing channel reservation protocols in WLANs view the wireless channel capacity as time invariant for each station and thus assign radio resources accordingly. This results in poor channel utilization particularly when channel gets assigned to stations that are in deep fading. In this paper, we devise a novel handshake-based channel-aware (HCA) media access control (MAC) protocol that assigns channel according to its fading status observed by each station and thus improves channel utilization. We give theoretical analysis of the overhead due to handshake procedure and prove that the expected value of handshake overhead is bounded as the number of stations in the system increases. Our analysis and simulation results show that the proposed protocol can ameliorate the contention among multiple users as well as reduce the packet loss due to channel fading. For example, in a system consisting of 16 stations when the average probability of channel being "healthy" is 0.5, the proposed handshake procedure reduces the packet-error rate (PER) to 8%, which satisfies the minimum requirement of IEEE 802.11-based protocols. However, this is without utilizing additional power. Under the same channel conditions any standard implementation of DCF would result in a packet error of 50% and would have to significantly increase the power level to achieve PER above 8%. The improvement in channel utilization due to the proposed protocol ranges from 11% to 460% depending upon channel conditions and traffic load.