In this paper we present a method for motion compensated image coding based upon a two-step displacement estimation procedure. The first step utilizes a maximum a posteriori (MAP) estimator to determine the best integer displacement, while the second step requires solving for the regression coefficients that supply the same information as the noninteger portion of the displacement. This approach is a different and simplified procedure in that the integer displacement is measured first, and then a linear combination of only four values from the previous image, shifted by the measured integer displacement, is used. This procedure differs both from the ones which measure the displacement vector

first and interpolate the previous image, and from the ones which use only linear prediction. This method is derived and results are presented for two separate 40-frame digital image sequences. A sum of absolute error distortion measure is used to determine the optimal structure of the residual quantizer.