Block-based motion estimation and compensation are the most popular techniques for video coding. However, as the shape and the structure of an object in a picture are arbitrary, the performance of such conventional block-based methods may not be satisfactory. In this paper, a very low bit-rate video coding algorithm that focuses on moving regions is proposed. The aim is to improve the coding performance, which gives better subjective and objective quality than that of the conventional coding methods at the same bit rate. Eight patterns are pre-defined to approximate the moving regions in a macroblock. The patterns are then used for motion estimation and compensation to reduce the prediction errors. Furthermore, in order to increase the compression performance, the residual errors of a macroblock are rearranged into a block with no significant increase of high-order DCT coefficients. As a result, both the prediction efficiency and the compression efficiency are improved.