There has been a significantly increased interest in building future UMTS systems based on IP (Internet protocol) technologies. The major motivation is to have a common service platform and transport for 3G networks based on IP. This is also reflected in the establishment of the 3G.IP industry group and current 3GPP standardisation activities. This paper presents an overview of this trend and summarises the major technical issues and challenges, with emphasis on migration towards an IP based UMTS system. This paper consists of three parts. It starts with a description of `all-IP based UMTS networks', including the scope of applying IP technologies and considerations of candidate architectures. An architecture is presented for all-IP based UMTS networks in which a packet multimedia service domain is overlaid on top of UMTS packet switch transport. The second part highlights an overview of the major technical challenges. This covers issues in voice/multimedia services, quality of service, mobility management, legacy system support and transport efficiency including radio efficiency. Finally the paper finishes with a discussion on the realisation and migration from UMTS Release '99 (R'99) network to such an all-IP based UMTS architecture.