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We propose a rate-distortion optimization (RDO) scheme based on the structural similarity (SSIM) index, which was found to be a better indicator of perceived image quality than mean-squared error, but has not been fully exploited in the context of image and video coding. At the frame level, an adaptive Lagrange multiplier selection method is proposed based on a novel reduced-reference statistical SSIM estimation algorithm and a rate model that combines the side information with the entropy of the transformed residuals. At the macroblock level, the Lagrange multiplier is further adjusted based on an information theoretical approach that takes into account both the motion information content and perceptual uncertainty of visual speed perception. Finally, the mode for H.264/AVC coding is selected by the SSIM index and the adjusted Lagrange multiplier. Extensive experiments show that the proposed scheme can achieve significantly better rate-SSIM performance and provide better visual quality than conventional RDO coding schemes.