A low-complexity, interlacing-artifact-aware de-interlacing algorithm which can efficiently remove interlacing artifacts from a video sequence before encoding is presented in this paper. The proposed algorithm detects the areas where interlacing artifacts occur and de-interlaces only those detected areas within a frame. It bypasses areas unaffected by artifacts. The proposed de-interlacing algorithm can reduce visually annoying interlacing artifacts and improve the perceptual quality of video in a very computationally efficient way subsequently. The coding efficiency of H.264 encoder is also increased by the proposed de-interlacing algorithm in terms of reduction in bit-rates. The experiments show the proposed algorithm yields better overall visual quality and coding efficiency with much lower processing time over more computationally complex de-interlacing algorithms.