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Although H.264/AVC is a promising video coding standard that achieves excellent coding performance in terms of visual quality and bitrate, its extremely high encoding complexity raises concerns about its computational burden on real-time applications. This work presents a multi-phase classification (MPC) scheme that builds a mode decision tree according to the clustering of rate-distortion costs. A nearest cluster mean criterion is used to examine candidate modes phase by phase, and a performance control mechanism is incorporated to maintain coding performance. Experimental results confirm that the proposed MPC algorithm reduces encoding time by an average of 68% with only negligible performance degradation.