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A new video coding tool, sample adaptive offset (SAO), is introduced in this paper. SAO has been adopted into the Working Draft of the new video coding standard, HighEfficiency Video Coding (HEVC). The SAO is located after deblocking in the video coding loop. The concept of SAO is to classify reconstructed pixels into different categories and then reduce the distortion by simply adding an offset for each category of pixels. The pixel intensity and edge properties are used for pixel classification. To further improve the coding efficiency, a picture can be divided into regions for localization of offset parameters. Simulation results show that SAO can achieve on average 2% bit rate reduction and up to 6% bit rate reduction. The run time increases for encoders and decoders are only 2%.