The H.264 video coding standard provides considerably higher coding efficiency than those of previous standards but its complexity is significantly increased. In this paper, we propose an efficient method of fast mode decision by exploiting spatio-temporal correlation in H.264. Firstly, we select skip mode or inter mode by considering the temporal correlation. Secondly, we select variable block size on inter mode by considering the spatial correlation. Simulations show that the proposed method reduces the encoding time by 71% on average without any significant PSNR losses. Keyword: skip mode, inter mode, spatial and temporal correlation, H.264/AVC.