An efficient and robust video watermarking algorithm for the state-of-the-art video coding standard H.264/AVC is proposed for copyright protection. Grayscale 2-D watermark patterns such as detailed trademarks or logos can be highly compressed by a proposed grayscale watermark pre-processing, and inserted into the low bit-rate H.264/AVC videos in the compressed domain. The marked video sequences maintain good visual quality and the same overall consuming bit-rate. The proposed algorithm can robustly survive transcoding process and common signal processing, such as bit-rate reduction, Gaussian filtering and contrast enhancement.