Fractional motion estimation (FME) searches subpixels for blocks of various sizes to find out the best matching candidate, which improves the compression efficiency but leads to high computational complexity. In this paper, we propose a low complexity FME design supporting adaptive mode selection (AMS). Exploiting both the mode correlation among neighboring macroblocks and integer motion estimation result, we can select FME modes adaptively to reduce complexity with good video quality. The simulation result shows that the average number of processing modes in FME is reduced to be 2 for HD1080 video instead of processing 7 modes in JM reference software. With tiny PSNR drop (∼0.026dB), the proposed design achieves 71% reduction in computational complexity when compared to JM14.2. At operating frequency of 300MHz, the proposed design could support the real-time processing for H.264 videos with resolution up to 4K × 2K.