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Hierarchical structure is a useful tool for providing the necessary scalability in adapting to the variety of channel environments. For schemes involving hierarchical picture structures, bit allocation, and rate control algorithms are vital components for improving video codec performance. Since conventional bit allocation schemes do not efficiently consider the hierarchical structure characteristics, it is difficult to optimize the video quality at an arbitrary bitrate. Similarly, conventional quantization parameter decision methods are not appropriate for controlling the bitrate generated by a codec using a hierarchical encoding structure. In this paper, we propose an effective bit allocation scheme that assigns the target number of bits to pictures or macroblocks (MBs) and improves the overall quality of images encoded by a hierarchical-based encoder. A rate control scheme is also proposed to ensure that the generated bitrate is equal to the assigned target bitrate. From the simulation results, the proposed schemes outperformed conventional methods from a rate-distortion perspective, by efficiently controlling the bitrate of the MB unit. The algorithms regulated the generated bits to achieve the target bits by using the proposed linear R-Q model.