A new method of video compression for angiographic images has been developed to achieve high compression ratio (~20:1) while eliminating block artifacts which leads to loss of diagnostic accuracy. This method adopts motion picture experts group's (MPEGs) motion compensated prediction to takes advantage of frame to frame correlation. However, in contrast to MPEG, the error images arising from mismatches in the motion estimation are encoded by discrete wavelet transform (DWT) rather than block discrete cosine transform (DCT). Furthermore, the authors developed a classification scheme which label each block in an image as intra, error, or background type and encode it accordingly. This hybrid coding can significantly improve the compression efficiency in certain eases. This method can be generalized for any dynamic image sequences applications sensitive to block artifacts.