Abstract: The video sequence encoding system with high compression efficiency is based on the H.264/AVC international video coding standard and is implementing proposed algorithms for: macroblock motion estimation; simplified rate-distortion optimization for transform size decision-making; acceleration of optimal macroblock type decision; modulation of quantization parameter with look-ahead refinement; and film-grain parameters calculation. The video encoding system comprises a motion estimation unit based on a measurement function for motion search of the matching texture block; a macroblock decision making unit; a pipeline processing module configured to accelerate complex transform; and a quantization parameter modulator configured to enhance the picture quality.