We propose a new mini-slot transmission scheme for a passive optical network (PON) in which each customer can be switched either to access mode or to internetworking mode dynamically. In this paper, we present the system implementation (called LAN-PON) as well as the performance of the proposed transmission scheme to illustrate its feasibility and benefits. A mini-slot scheme can rapidly reduce the queuing delay, which increases due to the flooding of the deflected packets in a deflection scheme. We evaluate the impact of mode switching time on the bandwidth gain (throughput) and delay of local area network (LAN) traffic in the LAN-PON with a mini-slot scheme. We also analyze a theoretical delay model of the proposed scheme. The simulation results demonstrate that switching time has an impact on LAN performance, and the average packet delay of the proposed scheme is significantly improved compared to that of the deflection scheme.