Rate control via /spl rho/-domain rate-distortion analysis (both rate and distortion are considered as functions of /spl rho/, the percentage of zero transform coefficients) relies on a distortion model which can be erroneous in many situations, especially at the macroblock level (Z. He and S. K. Mita, 2002). This paper uses an accurate distortion measurement in the transform domain to drive a better macroblock level bit allocation. Specifically, we propose an algorithm based on an accurate distortion-to-/spl rho/ mapping in order to minimized the distortion while matching the target rate. Experimental results show that our proposed algorithm achieved 0.1 to 0.3 dB better PSNR compared to the pure /spl rho/-domain rate control.