This paper proposes a new algorithm to encode the spectral envelope for G.729.1 more accurately. It applies the normalized least-mean- square (NLMS) algorithm to each subband energy of the modified discrete cosine transform (MDCT) in the time-domain alias cancellation (TDAC) of G.729.1. By utilizing the estimation error of subband energies by means of NLMS, allocated bit reduction for spectral envelope coding is achieved. The saved bits are then reused to improve the spectral envelope estimation and thus enhance the sound quality. Experimental results confirm that the proposed algorithm improves the sound quality under both clean and packet loss conditions.