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This paper presents a novel offset encoding scheme for memory-efficient IP address lookup, called Offset Encoded Trie (OET). Each node in the OET contains only a next hop bitmap and an offset value, without the child pointers and the next hop pointers. Each traversal node uses the next hop bitmap and the offset value as two offsets to determine the location address of the next node to be searched. The on-chip OET is searched to find the longest matching prefix, and then the prefix is used as a key to retrieve the corresponding next hop from an off-chip prefix hash table. Experiments on real IP forwarding tables show that the OET outperforms previous multi-bit trie schemes in terms of the memory consumption. The OET facilitates the far more effective use of on-chip memory for faster IP address lookup.