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With the rapid development of broadband networks and multimedia technologies, P2P video-on-demand service is increasingly gaining popularity over the past few years. However, little work has been done on an important design issue for P2P video-on-demand systems, i.e., determining the maximal service capacity of a system. In this paper, we first propose an optimal rate allocation scheme to maximize the service capacity of a P2P video-on-demand system. The proposed rate allocation scheme determines the parent/child relationship among peers and the link rates between peers. Then we develop an admission control policy based on the proposed rate allocation scheme. Our simulation results showed that the proposed scheme demonstrates high efficiency compared to other rate allocation schemes.