There has been rapid progress in the application of wavelet transforms to image and image sequence compression. The standard discrete wavelet transform lacks transition invariance in image decomposition which will affect the accuracy of motion estimation from the decomposed subimages in video coding. In this article, we present a study of applying an almost shift-invariant wavelet transform with “oversampled frames” to image sequence compression. With minimal oversampling and biorthogonal spline wavelets in the almost shift-invariant wavelet transform, motion vectors can be more accurately estimated, contributing toward fewer prediction errors in comparison to those obtained with the standard discrete wavelet transform. Thus, an improved compression ratio can be obtained. We present two new algorithms, the full-motion oversampling algorithm (FMOS) and the reduced search multiresolution motion estimation algorithm (MRME), for estimating motion fields at different scales and in different subimages. In the latter, motion vectors at a higher resolution are approximated by the motion vector estimates at a lower resolution through proper scaling. Experiments were performed on three video sequences with a variety of motions including slow, fast, and zooming. Our results have shown that both algorithms, FMOS and MRME, using the almost shift-invariant oversampled frame wavelet transform have reduced prediction errors and enhanced the compression performance in terms of peak-signal-to-noise ratio (PSNR) for the same bit rate when compared to the existing full motion standard algorithm. © 1998 John Wiley & Sons, Inc. Int J Imaging Syst Technol, 9, 214–229, 1998