This paper presents an adaptive search range selection based on prediction error and local statistics of the neighboring blocks. The performance, computation, and power consumption of block matching motion estimation algorithms in video coding standards depends on the motion search range. An optimal search range for each block is determined on the basis of motion vectors and prediction errors obtained for a region blocks for which those values have already been obtained. Same search range is utilized for different frames subjected to correlation of scalability. The result shows that there is a significant reduction of computational cost of video encoder, since a narrow search a range is chosen for area with little motion blocks. Thus, in encoding a video our method results in reduction of computation complexity of block based motion estimation by 45% with negligible PSNR degradation.