Fractional motion estimation (FME) is widely used in video compression standards. In H.264/AVC, the precision of motion vector is down to quarter pixels to improve the coding efficiency. However, FME occupies over 45% of the computation complexity in an H.264 encoder and this high complexity limits the processing capability. In this paper, a single-iteration full search FME is proposed. By the algorithm and architecture co-optimization, the bandwidth to the frame buffer is reduced by 31%. Furthermore, 82% of circuit area for the Hadamard transformation and subtraction are saved from the direct implementation. Compared with prior arts, the proposed design supports 3.39