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We propose an efficient strategy for the transmission of scalable video over multiple-input multiple-output (MIMO) wireless systems. In this paper, we use the latest scalable H.264 codec (SVC), which provides combined temporal, quality and spatial scalability. At the transmitter, we estimate the decoded video distortion for given channel conditions taking into account the effects of quantization, packet loss and error concealment. The proposed scalable decoder distortion algorithm offers low delay and low complexity. The performance of this method is validated using experimental results. In our proposed system, we use a MIMO system with orthogonal space-time block codes (O-STBC) that provides spatial diversity and guarantees independent transmission of different symbols within the block code. The bandwidth constrained allocation problem considered here is simplified and solved for one O-STBC symbol at a time. Furthermore, we take the advantage of the hierarchical structure of SVC to attain the optimal solution for each group of pictures (GOP) of the video sequence. We incorporate the estimated decoder distortion to optimally select the application layer parameter, i.e., quantization parameter (QP), and physical layer parameters, i.e., channel coding rate and modulation type for wireless video transmission.