1 This paper addresses the problem of side information generation in distributed video compression (DVC) schemes. Intermediate frames constructed by motioncompensated interpolation of key frames are used as side information to decode Wyner-Ziv frames. The limitations of block-based translational motion models call for new motion models. This article studies the benefits of meshbased motion-compensated (MC) interpolation for side information extraction in DVC. A hybrid block-based and mesh-based solution addressing the problem of motion discontinuities and occlusions is also described. The increased correlation between the side information and the Wyner-Ziv encoded frames leads to performance gains which can reach up to 1 dB with respect to block-based solutions.