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In this paper, we present a fast motion estimation algorithm for arbitrarily shaped video coding in MPEG-4. This novel algorithm takes advantage of our new discovery about the close relation between the best matching block and its shape information-alpha plane. Without any additional padding computation, this new motion estimation algorithm computes the sum of absolute difference (SAD) between two alpha planes rather than the pixels' intensities. Compared with the full search block-matching algorithm (recommended in the MPEG-4 standard), the proposed algorithm achieves an impressive speed-up ratio with very minor quality degradation and little bit-count increase. Extensive simulations are provided in this paper to demonstrate this fact.