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Variable block size motion estimation is adopted in the new video coding standard, MPEG-4 AVC/JVT/ITU-T H.264, due to its superior performance compared to the advanced prediction mode in MPEG-4 and H.263+. In this paper, we modified the reference software in a hardware-friendly way. Our main idea is to convert the sequential processing of each 8×8 sub-partition of a macro-block into parallel processing without sacrifice of video quality. Based on our algorithm, we proposed a new hardware architecture for variable block size motion estimation with full search at integer-pixel accuracy. The features of our design are 2-D processing element array with 1-D data broadcasting and 1-D partial result reuse, parallel adder tree, memory interleaving scheme, and high utilization. Simulation shows that our chip can achieve real-time applications under the operating frequency of 64.11 MHz for 720×480 frame at 30 Hz with search range of [-24, +23] in horizontal direction and [-16, +15] in vertical direction, which requires the computation power of more than 50 GOPS.