A wavelet-based video codec that performs layering of encoded bit streams to support layered scalable video streaming is presented in this paper. The proposed codec can generate separate bit streams comprising different cumulative layers. A new sorting algorithm is incorporated to produce spatial and temporal resolution scalable bit streams, and a specially designed layer-ID is used to identify the layer that a particular data packet belongs to. The proposed codec is more suitable for real network environments as it is able to correctly decode bit streams that have experienced losses incurred during network transmission loss.