Abstract: With the development of wireless network and hand-hold devices such as i Pad, personal digital assistant and smartphone, screen content video becomes more popular for screen sharing or screen broadcasting. In our previous work, we proposed a pixel granularity template matching prediction method; almost 80% residual samples are zero for some screen content picture, and other 20% non-zero prediction residuals are encoded with the intuitive method. In order to further improve the coding efficiency, a palette based method is proposed in this paper. During encoding, a global palette and a local palette will be derived according to the statistics of non-zero residuals. Non-zero residuals will be encoded with the palette index. Palettes, indices and residuals will be transmitted. The experiment results show that the proposed palette tool can greatly improve the coding efficiency.