Motion compensated coding of interlaced digital video signals is provided. Pixel data from successive interlaced video fields is compared to similarly situated pixel data in a plurality of previous fields to find a preferred counterpart for each current field set of pixel data. A prediction error signal is generated for each current field set of pixel data indicative of the difference between it and its preferred counterpart from a previous field. Each prediction error signal is encoded with data indicative of the previous field in which the preferred counterpart can be found. In a preferred embodiment, each set of current field pixel data is compared to a range of similarly situated pixels in each of the previous fields, and the prediction error signal is also encoded with motion vector data indicative of the location of the preferred counterpart in its previous field.