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A new rate control algorithm is proposed, which is based on so-called ρ-domain rate-distortion analysis . ρ is defined as the percentage of zero discrete cosine transform coefficients in a frame, and is known to be correlated with the compressed bit rate. Using a simple rate estimation method based on a variable length code table, the linear rate model of rate-ρ relation is constructed. The linear rate model is applied to the frame-level as well as the macroblock-level rate control. The proposed rate control algorithm provides a more accurate rate regulation, a better quality of picture, and lower computation amount than H.263 TMN8 rate control.