The goal of fragment allocation in distributed database systems is to place data fragments at sites so as to minimize the overall data transmission cost incurred to answer queries. We consider the problem of fragment allocation in lazily replicated systems and address both placement and replication issues in an integrated approach. While replication can improve performance via increased locality, excessive replication can incur extra overhead cost to maintain replicas. A comprehensive model that takes into account network topology, fragment correlation, and data access patterns is presented. Based on this model, we propose an algorithm to find near-optimal dynamic allocation solutions. Experimental results show the efficacy of the proposed solution.