Abstract: An apparatus and method for determining inter-frame motion during compression of digital video data incorporates a computationally efficient hierarchical block-matching motion estimation technique in conjunction with a full-search block-matching approach. In the hierarchical block-matching method, a macroblock is filtered and decimated, and a search area is also filtered and decimated. A block-matching search is performed within the filtered and decimated search area. An augmented block in the original search area that corresponds to the block in the decimated search area that provided the best match with the decimated macroblock is then compared with the original macroblock to determine a motion vector. Operating parameters specify the search range based on the type of frame being processed, i.e. P-frame or B-frame, and, in the case of B-frames, the distance of the B-frame from the reference frame.