Abstract The variable block size mode decision employed in H.264/AVC improves its coding efficiency, which also increases the computational complexity when rate distortion optimization (RDO) is used. To reduce the computational complexity of H.264/AVC a fast intra and inter mode decision technique is implemented. The fast intra mode decision is achieved by eliminating the less likely prediction modes from the rate distortion computation, for which a method based on directions of prediction and the Sum of Absolute Transformed Difference (SATD) is used for mode selection. The fast inter mode decision algorithm employs early skip mode detection, adaptive thresholds and the correlation of adjacent macroblocks to reduce the computational complexity. The experimental results show that the proposed method can reduce the coding time by 50.73% and thereby improve the real time performance, with slight video quality degradation of 0.13dB and bit-rate increment of 1.13%.