In this paper, we present a fast mode decision algorithm for H.264/AVC intra prediction. The goal of this work is to reduce computational complexity of the H.264 encoder without significant rate-distortion degradation. For luminance and chrominance mode decision, we design two separate optimization methods. In order to select the candidate modes for Intra4x4 and Intra16x16 prediction efficiently, we use spatial correlation and simple directional information. Additionally, we apply an early block size selection method to further reduce the searching time. Experimental results show that the proposed algorithm can save the entire encoding time by 82% on average while introducing negligible loss in PSNR values and small increment of bit rates.