The intra-mode and inter-mode predictions have been made available in H.264/AVC for effectively improving coding efficiency. However, exhaustively checking for all the prediction modes for identifying the best one (commonly referred to as exhaustive mode decision) greatly increases computational complexity. In this paper, a fast mode decision algorithm, called the motion activity-based mode decision (MAMD), is proposed to speed up the encoding process by reducing the number of modes required to be checked in a hierarchical manner, and is as follows. For each macroblock, the proposed MAMD algorithm always starts with checking the rate-distortion (RD) cost computed at the SKIP mode for a possible early termination, once the RD cost value is below a predetermined ldquolowrdquo threshold. On the other hand, if the RD cost exceeds another ldquohighrdquo threshold, then this indicates that only the intra modes are worthwhile to be checked. If the computed RD cost falls between the above-mentioned two thresholds, the remaining seven modes, which are classified into three motion activity classes in our work, will be examined, and only one of the three classes will be chosen for further mode checking. The above-mentioned motion activity can be quantitatively measured, which is equal to the maximum city-block length of the motion vector taken from a set of adjacent macroblocks (i.e., region of support, ROS). This measurement is then used to determine the most possible motion-activity class for the current macroblock. Experimental results have shown that, on average, the proposed MAMD algorithm reduces the computational complexity by 62.96%, while incurring only 0.059 dB loss in PSNR (peak signal-to-noise ratio) and 0.19% increment on the total bit rate compared to that of exhaustive mode decision, which is a default approach set in the JM reference software.