In recent years, a tremendous success in wavelet image coding has been achieved. It is mainly attributed to innovative strategies for data organization and representation of wavelet-transformed images. However, there have been only a few successful attempts in wavelet video coding. The most successful is perhaps Sarnoff Corp.'s zerotree entropy (ZTE) video coder. In this paper, a novel hybrid wavelet video coding algorithm termed video significance-linked connected component analysis (VSLCCA) is developed for very low bit-rate applications. There also has been empirical evidence that wavelet transform combined with those innovative data organization and representation strategies can be an invaluable asset in very low bit-rate video coding as long as motion compensated error frames are ensured to be free of blocking effect or coherent.In the proposed VSLCCA codec, first, fine-tuned motion estimation based on the H.263 Recommendation is developed to reduce temporal redundancy, and exhaustive overlapped block motion compensation is utilized to ensure coherency in motion compensated error frames. Second, wavelet transform is applied to each coherent motion compensated error frame to attain global energy compaction. Third, significant fields of wavelettransformed error frames are organized and represented as significance-linked connected components so that both the withinsubband clustering and the cross-scale dependency are exploited. Last, the horizontal and vertical components of motion vectors are encoded separately using adaptive arithmetic coding while significant wavelet coefficients are encoded in bit-plane order by using high order Markov source modeling and adaptive arithmetic coding.Experimental results on eight standard MPEG-4 test sequences show that for intraframe coding, on average the proposed codec exceeds H.263 and ZTE in peak signal-to-noise ratio by as much as 2.07 and 1.38 dB at 28 kbits, respectively. For entire sequence coding, VSLCCA is superior to H.263 and ZTE by 0.35 and 0.71 dB on average, respectively.