With growing popularity and richer functionality of handheld devices such as PDAs and smart phones, users can enjoy a variety of videos in almost anyplace and anytime. However, since the battery-consumed devices are constrained by limited resources, decoding of full scale video in terms of the frame size and rate is not efficient for handheld devices. This paper presents a low complexity and perceptual quality optimized video playback algorithm. In the proposed method, the best combination of the frame size and rate is determined to maximize the user perceived quality subject to given complexity constraint. According to the selected frame size and rate, the proposed H.264 decoder performs the spatio-temporal rescaling during video playback. Experimental results show that the proposed method reduces the computational complexity significantly while maintaining the acceptable video quality for video playback on handheld devices.