A novel video coding algorithm based on adaptive blocking regional wavelet transform and dis-crete cosine transform is described in this paper. An adaptive algorithm of motion estimation employs the spatial-temproal correlation presented in motion vector field to reduce calculating complexity. The high energy regions ofinterframe predicted difference are first detected using hierarchical sliding-window region forming algorithm.Thedetected regions are segmented to DWT regions and DCY regions. This scheme reduce the ringing-effects andblocking-effects compared with traditional DWT or DCf coding algorithms . A quantization model based on HVSspatiality-frequency and time-frequency feature is used in coding algorithm.Simulation result shows acceptableimage quality for CIF resolution at low bit-rate and very low bit-rate. This video coding algorithm is downwardcompatible with H.263

and is suited for low bit-rate video conference application.