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The inter-layer residual prediction mode can increase the coding efficiency as well as the computation complexity. This paper presents a low complexity algorithm for inter-layer residual prediction of H.264/SVC. Proposed two-step algorithm focuses on the reduction of the candidate modes by making use of the correlations of the encoding cost between the base layer and enhancement layers. In the first step, the ordinary routine of rate-distortion optimization (RDO) for H.264/AVC is performed and a temporary best mode (TBM) is selected. Then, in the second step the encoding cost of the TBM and the candidate modes in the enhancement layer are compared to determine the redundant coding modes from all the candidate modes. The experiment results show that proposed algorithm can considerably reduce redundant computation complexity with almost no coding efficiency loss.