In this paper we propose a fast motion estimation technique that works in the wavelet domain. The computational cost of the algorithm turns out to be proportional to the linear size of the search window instead of its area. We complete our proposal with a variable-size block-matching scheme in the wavelet domain. We integrated the motion estimation algorithm in a fully-scalable wavelet in-band prediction coder inspired by the IB-MCTF (In-Band Motion Compensation Temporal Filtering) proposed in [1]. Comparative tests prove that our coder provides the same quality level than IB-MCTF at a very reduced computational cost. Moreover, although our method turns out to match the performance of MCTF-EZBC [2] in terms of PSNR, it clearly outperforms it in terms of perceptual quality, as it is completely free from blocking artifacts.