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The rate allocation tradeoff between motion vectors and transform coefficients has a major importance when it comes to efficient video compression. This paper introduces a new coding mode for an H.264/AVC-like video coder, which improves the management of this resource allocation. The proposed technique can be used within any hybrid video encoder allowing a different coding mode for any macroblock. The key tool of the new mode is the lossy coding of motion vectors, obtained via quantization: while the transformed motion-compensated residual is computed with a high-precision motion vector, the motion vector itself is quantized before being sent to the decoder, in a rate/distortion optimized way. Several problems have to be faced with in order to get an efficient implementation of the coding mode, especially the coding and prediction of the quantized motion vectors, and the selection and encoding of the quantization steps. This new coding mode improves the performance of the hybrid video encoder over several sequences at different resolutions.