PDP(plasma display panel) represents the gray levels by the pulse number modulation technique that results in undesirable dynamic false contours on moving images. This paper proposes a LUT(Look-up table) based error diffusion algorithm for reduction of the dynamic false contours. A quantitative measure of the dynamic false contours is defined first. The measure of the dynamic false contours is calculated through simulation of every gray level combination of two consecutive frames. Based on the calculated measures, a modified gray level for a pair of gray levels of two consecutive frames is chosen to reduce the dynamic false contours. The chosen gray levels serve as contents of a gray level conversion LUT. Given a pair of gray levels of two consecutive frames, the gray level of current frame is modified based on the gray level conversion LUT. The new gray level is displayed on PDP. An error diffusion algorithm is, then, applied to compensate for the differences in the gray levels.