We present a novel scheme for the transmission of H.264/AVC video streams over lossy packet networks. The proposed scheme exploits the error resilient features of H.264/AVC codec and employs Reed-Solomon codes to protect effectively the streams. The optimal classification of macroblocks into slice groups and the optimal channel rate allocation are achieved by iterating two interdependent steps. Simulations clearly demonstrate the superiority of the proposed method over other recent algorithms for transmission of H.264/AVC streams