A decoder-friendly subpel motion vector (MV) selection scheme for H.264/AVC video encoding is proposed in this work. First, the rate-distortion (RD) relationship with respect to subpel MVs is examined to shed light on the tradeoff of R-D performance degradation and complexity reduction in different block types. It is observed that the R-D gain of some macroblocks (MB) is greatly enhanced by employing subpel MVs while others are not. An SAD-based approach is adopted to decide whether the subpel MV scheme is needed for a certain MB. To enhance the prediction accuracy, the correlation of MVs in the spatial domain is also exploited. Our scheme further introduces decoder complexity budget to aid the designer in making design tradeoffs. Experimental results indicate that our scheme is flexible enough that the actual achieved complexity is very close to the target complexity budget under different QP settings.