This paper describes an implementation of a software H.261 codec for PC, that takes an advantage of the fast computational algorithms for DCT-based video compression, which have been presented by the author at the February's 1995 SPIEI'IS&T meeting. The motivation for developing the H.261 prototype system is to demonstrate a feasibility of real time software-only videoconferencing solution to operate across a wide range of network bandwidth, frame rate, and resolution ofthe input video. As the bandwidths ofcurrent network technology will be increased, the higher frame rate and resolution of video to be transmitted is allowed, that requires, in turn, a software codec to be able to compress pictures of CIF (352x288) resolution at up to 30 frame/sec. Running on Pentium 133 MHz PC the codec presented is capable to compress video in CIF format at 21-23 frame/sec. This result is comparable to the known hardware-based H.261 solutions, but it doesn't require any specific hardware. The methods to achieve high performance, the program optimization technique for Pentium microprocessor along with the performance profile, showing the actual contribution of the different encoding/decoding stages to the overall computational process, are presented.