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In modern IP routers, Internet protocol (IP) lookup forms a bottleneck in packet forwarding because the lookup speed cannot catch up with the increase in link bandwidth. Ternary content-addressable memories (TCAMs) have emerged as viable devices for designing high-throughput forwarding engines on routers. Called ternary because they store don't-care states in addition to 0s and 1s, TCAMs search the data (IP address) in a single clock cycle. Because of this property, TCAMs are particularly attractive for packet forwarding and classifications. Despite these advantages, large TCAM arrays have high power consumption and lack scalable design schemes, which limit their use. We propose a two-level pipelined architecture that reduces power consumption through memory compaction and the selective enablement of only a portion of the TCAM array. We also introduce the idea of prefix aggregation and prefix expansion to reduce the number of routing-table entries in TCAMs for IP lookup. We also discuss an efficient incremental update scheme for the routing of prefixes and provide empirical equations for estimating memory requirements and proportional power consumption for the proposed architecture.