The latest video coding standard, MPEG-4 AVC/H.264 provides the best performance in compression efficiency among existing video coding standards. To achieve higher compression efficiency, AVC/H.264 standard employs a variety of encoding tools but at the expense of greater computational complexity of the encoder. In this paper, we propose a fast mode decision algorithm for the design of a fast AVC/H.264 encoder by exploiting spatio-temporal correlation of macro block (MB) mode types. Through the statistical analysis of encoding mode types in AVC/H.264 JM 11.0, we found that the best mode type of the current MB is highly correlated with the mode types of spatially neighboring MBs and temporally collocated MBs. The experimental results showed that AVC/H.264 encoder using our proposed method produced about 66 % speedup without noticeable visual degradation compared to the AVC/H.264 JM 11.0 encoder.