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A scheme is described which sequentially encodes the output of a discrete letter source into the input symbols of a discrete input memoryless channel, with adjacent channel symbols mutually constrained over a length, . The encoder permits desired channel input symbol probabilities to be approximated closely. Decoding at the receiver is accomplished with delay by means of sequential tests on potential transmitted sequences with reject criteria set so that incorrect sequences are likely to be rejected at short lengths and the correct sequence is likely to be accepted. Averaged over a suitably defined ensemble of encoders, the decoding scheme has an average probability of error with an upper limit whose logarithm approaches for large is dependent only on the data rate . For a channel symmetric at its output with equally likely inputs, the exponent is optimum for rates greater than a rate called . For such symmetric channels, a computation cutoff rate is defined. For , the average number of decoding computations does not grow exponentially with , but algebraically. is also defined for an asymmetric channel. In this case too, the average number of decoding computations grows algebraically with for .