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The technique of variable block-size motion estimation is employed in the H.264 international video coding standard to obtain better compression performance. However, this technique brings about a lot of increase in the computational complexity and thus is very time-consuming. For this reason, a new fast motion estimation mode decision algorithm is proposed in this paper to reduce the computational complexity of the variable block-size motion estimation. This is achieved by excluding unlikely motion estimation modes. First, direct detection of the 16 x 16 mode is carried out, which is based on the temporal and spatial correlation in a video sequence. Then, according to the statistical analysis and the correlative characteristics of the seven modes in the H.264, effective criteria for mode excluding is employed. Experimental results demonstrate that the proposed algorithm can achieve up to 33.24 percent to 39.93 percent of speed up with about the same accuracy.