The H.264/AVC video coding standard shows high coding efficiency compared to previous video coding standards by applying new coding features. However, due to the exhaustive Rate-distortion optimization (RDO) based mode decision process, the computational complexity of the encoder greatly increases. In this paper, a fast mode decision algorithm for spatial DIRECT mode in B slice in H.264 standard is proposed. It is based on statistical analysis of multiple sequences, and the strong relationship of RD cost and encoding mode between the current DIRECT macroblock (MB) and the co-located MB is observed. Simulation results show the proposed method could reduce ME time by up to 65% compared with the original exhaustive rate distortion based mode decision method with only negligible coding loss.