For exploitation of temporal interdependencies between consecutive frames, in existing 3D wavelet video coding concepts a blockwise motion estimation (ME) and compensation (MC) is employed. Because of local object motion, rotation or scaling, the processing of occlusion areas is problematic. In these regions, the calculation of correct motion vectors (MV) is not always possible and blocking artifacts may appear at the motion boundaries to the connected areas, for which uniquely referenced MV could be estimated. In order to avoid this, smooth transitions can be included around the occlusion pixels, which means to blur out the block artifacts. The proposed algorithm is based on the MC-EZBC 3D wavelet video coder (Motion-Compensated Embedded video coding algorithm using ZeroBlocks of subband / wavelet coefficients and Context modeling), which employs a lifting approach for temporal filtering.