This paper presents a low-complexity algorithm for an H.264/AVC encoder. The proposed motion estimation scheme determines the best coding mode for a given macroblock (MB) by finding motion-blurred MBs; identifying, before motion estimation, an early selection of MBs; and hence saving processing time for these MBs. It has been observed that human vision is more sensitive to the movement of well-structured objects than to the movement of randomly structured objects. This study analyzed permissible perceptual distortions and assigned a larger inter-mode value to the regions that are perceptually less sensitive to human vision. Simulation results illustrate that the algorithm can reduce the computational complexity of motion estimation by up to 47.16% while maintaining high compression efficiency.