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We introduce a cross-layer priority-aware packet fragmentation scheme at the MAC layer to enhance the quality of pre-encoded H.264/AVC compressed bitstreams over bit-rate limited error-prone links in wireless networks. The H.264 slices are classified in four priorities at the encoder based on their cumulative mean square error (CMSE) contribution towards the received video quality. The slices of a priority class in each frame are aggregated into video packets of corresponding priority. We derive the optimal fragment size for each priority class which achieves the maximum expected weighted goodput at different encoded video bit rates, slice sizes and bit error rates. Priority-aware packet fragmentation invokes slice discard in the buffer due to channel bit rate constraints on allocating fragment header bits. We propose a slice discard scheme using frame importance and slice CMSE contribution to control error propagation effects. Packet fragmentation is extended to slice fragmentation by modifying the conventional H.264 decoder to handle partial slice decoding. Priority-aware slice fragmentation combined with the proposed slice discard scheme provides considerable PSNR and VQM gains as compared to priority-agnostic fragmentation.