H.264/AVC encoder complexity is remarkable due to mainly variable block size ME and exhaustive RDO mode decision. This makes application of H.264/AVC in network especially wireless environments very difficult. To reduce encoder complexity, in this paper, statistical characteristics of modes among adjacent macroblocks (MBs) spatially and temporally are first studied using H.264 reference software. Then a fast algorithm is presented to reduce jointly the computational load of mode decision and ME. The main ideas are as follows: (1) Candidate modes for current MB are first inferred from mode and motion information of defined reference MBs and then partial RDO approach is applied to make target selection; (2) ME is considered as a part of mode decision and no ME is required for particular modes that are eliminated in advance; (3) The exhaustive RDO method is invoked only if average distortion of the reference MBs goes beyond a predefined threshold. Simulation results demonstrate that our scheme can reduce encoder complexity significantly while coding efficiency is only slightly decreased.