Abstract: A rate control algorithm for a predictive video encoder is provided to accurately control the coding rate while requiring a small complexity. The algorithm assumes the video encoder to consist of two processors, pre-processor and main processor, and the rate control located in main processor uses prediction cost and residual cost for each picture that are computed in pre-processor. Prediction cost represents the estimated number of bits needed to generate an error image, and residual cost describes the difficulty of encoding the resultant error image. Accurate and simple rate control is made possible by using a new rate model that adapts to the local characteristic of a video sequence, and by targeting to maintain the quantization parameter as constant as possible in a given set of pictures, GOP, instead of the conventional two step approach.