Method and apparatus of Inter prediction for video coding are disclosed. When a sub-block motion compensation coding tool is selected for the current block, the method generates sub-block MVs (motion vectors) associated with multiple sub-blocks, which are included or contained in the current block, according to the sub-block motion compensation coding tool, constrains the sub-block MVs within a range to form constrained sub-block MVs, and applies motion compensation to the current block using the constrained sub-block MVs or applies motion compensation to the current block using one sub-block MV within the range around the primary MV in a second list if a corresponding sub-block MV in a first list is outside the range. In another method, motion compensation is applied to the current block only using reference pixels of reference sub-blocks within a primary reference block.