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To achieve superior performance, rate-distortion optimized motion estimation (ME) for variable block size (RDO VBSME) is often used in state-of-the-art video coding systems such as the H.264 JM software. However, the complexity of RDO-VBSME is very high both for software and hardware implementations. In this paper, we propose a hardware-friendly ME algorithm called RDOMFS with a novel hardware-friendly rate-distortion (RD)-like cost function, and a hardware-friendly modified motion vector predictor. Simulation results suggest that the proposed RDOMFS can achieve essentially the same RD performance as RDO-VBSME in JM. We also propose a matching hardware architecture with a novel Smart Snake Scanning order which can achieve very high data re-use ratio and data throughout. It is also reconfigurable because it can achieve variable data re-use ratio and can process variable frame size. The design is implemented with TSMC 0.18 μm CMOS technology and costs 103 k gates. At a clock frequency of 63 MHz, the architecture achieves real-time 1920 × 1080 RDO-VBSME at 30 frames/s. At a maximum clock frequency of 250 MHz, it can process 4096 × 2160 at 30 frames/s.