A linear transform based motion compensated prediction (LTMCP) scheme is proposed in this paper to improve the efficiency of inter-frame prediction when the intensity of luminance changes abruptly across frames. Either uniform or non-uniform intensity changes can be well processed as the proposed scheme is applied at macroblock (MB) level. LT-MCP is implemented based on the H.264 reference software to evaluate its performance. For those sequences with significant luminance changes across frames, such as Crew, we can achieve about