A method of dictionary coding using coding unit (CU) based processing or using string length coding by taking into account of color component aligned matched sample-strings are disclosed. In the dictionary coding using CU based processing, the pixels in each CU is converted to one-dimensional (1-D) pixel data according to an intra-block scanning pattern. A string search is then performed to determine a match condition regarding whether a current sample-string starting at a current position of the current 1-D packed pixel data matches a previously coded sample-string in the reference 1-D packed pixel data. For string length coding by taking into account of color component aligned matched sample-strings, a flag is signaled to indicate whether the string length of one previously coded sample-string is in a length group corresponding to color-component-aligned previously coded sample-strings.