This article presents a complete video codec which supports both block‐based and mesh‐based motion compensation modes. While the mesh‐based modes are suitable for spatially continuous representation of in‐plane rotations, zooms, and other motions that can be represented by parametric mappings, the block‐based modes (especially overlapped block matching) perform better around motion boundaries. Therefore, a hybrid codec with block‐based and mesh‐based modes, which nicely complement each other, yields the best results over a wide range of video at low bit rates. Experimental results with MPEG‐4 test sequences are shown to demonstrate the performance of the proposed hybrid codec. © 1998 John Wiley & Sons, Inc. Int J Imaging Syst Technol, 9, 248–256, 1998