An adaptive variable bit rate audio encoder and method that examines audio level information and detects various information in the audio data in a psychoacoustic model to create a quantization value and assign a mode tag to a single frame of audio. A bit rate is assigned according to one of three modes, a self-adaptive mode which is free-running and takes direction only from the characteristics of the incoming audio signal, a managed mode which is controlled by rules set from a statistical multiplexer, and a combination of self-adaptive and managed in which control rules from the statistical multiplexer act to maintain limits on the self-adaptive mode.