A new model for the transport equation for the turbulence energy dissipation rate ε and for the anisotropy of the dissipation rate tensor εij, consistent with the near-wall limits, is derived following the term-by-term approach and using results of direct numerical simulations (DNS) for several generic wall-bounded flows. Based on the two-point velocity covariance analysis of Jovanović, Ye & Durst (1995) and reinterpretation of the viscous term, the transport equation is derived in terms of the ‘homogeneous’ part εh of the energy dissipation rate. The algebraic expression for the components of εij was then reformulated in terms of εh, which makes it possible to satisfy the exact wall limits without using any wall-configuration parameters. Each term in the new equation is modelled separately using DNS information. The rational vorticity transport theory of Bernard (1990) was used to close the mean curvature term appearing in the dissipation equation. A priori evaluation of εij, as well as solving the new dissipation equation as a whole using DNS data for quantities other than εij, for flows in a pipe, plane channel, constant-pressure boundary layer, behind a backward-facing step and in an axially rotating pipe, all show good near-wall behaviour of all terms. Computations of the same flows with the full model in conjunction with the low-Reynolds number transport equation for (uiui) All Overbar, using εh instead of ε, agree well with the direct numerical simulations.