H.264/AVC　the　latest　international　video　coding　standard　achieves　higher　compression　efficiency　than　previous　video　coding　standards.　However,　this　performance　gain　comes　at　the　cost　of　an　increased　computational　complexity.　To　achieve　a　high　coding　efficiency,　H.264/AVC　employs　complex　mode　decision　techniques　based　on　Rate-Distortion　Optimization,　the　computational　complexity　is　very　high.　This　is　a　major　bottleneck　for　the　H.264/AVC　in　real-time　application.　Inter-frame　prediction　coding　is　one　of　the　most　important　parts　in　H.264/AVC.　In　order　to　reduce　the　computational　complexity,　a　fast　mode　decision　algorithm　based-on　the　characteristic　of　macro-block　is　proposed　for　Inter-frame　in　H.264/AVC　in　this　paper.　With　the　new　algorithm,　the　amount　of　computation　involved　in　the　motion　estimation　and　mode　decision　can　be　substantially　reduced.　Simulation　results　show　that　the　proposed　algorithm　can　reduce　about　70%　on　average　of　the　total　encoding　time,　with　a　slight　increase　in　bit-rate　and　a　negligible　PSNR　drop.　©　2010　IEEE.