In this paper, we introduce a new implementation of motion-compensated temporal filter (MCTF) based video coder which utilizes rate-distortion optimal wavelet packet transform (RDWP) for some low bit rate video coding application scenarios. Although enhanced MC-EZBC video coder provides good scalability and high coding efficiency at high bit rates, reconstructed video quality will drop rapidly with increased motion at low bit rates. The proposed video coder applies optimal wavelet packet transform to each temporal frame and rate-distortion optimization to each GOP. Experimental results show this codec provides better performance than MC-EZBC with PSNR improved 0.3–1.2dB at low bit rates.