A new approach to Variable Size Block Matching is proposed, based on the binary partitioning of blocks. If a particular block does not allow for accurate motion compensation, then it is split into two using the horizontal or vertical line that achieves the maximum reduction in motion compensation error. This method causes partitioning to occur along motion boundaries, thus substantially reducing blocking artifacts. In addition, small blocks are placed in regions of complex motion, while large blocks cover regions of uniform motion. The proposed technique provides significant