This paper proposes a fast motion estimation algorithm for MPEG-4 shape coding. The proposed algorithm is based on inherent properties of shape coding as well as shape information, i.e., context-based motion estimation feature, motion vector (MV) correlation between neighboring binary alpha blocks (BAB's), and binary feature of shape information. By using these properties, the proposed algorithm can achieve a high processing speed. Simulation results show that our algorithm can reduce the computational complexity of ME for shape coding up to 90% at least even for the worst case. Therefore, the algorithm is suitable for real-time software applications of MPEG-4 shape encoding.