A video encoder and corresponding methods are provided for weighted prediction estimation using a displaced frame difference or differential, the encoder embodying a method for receiving a substantially uncompressed image block, assigning a weighting factor for the image block corresponding to a particular reference picture having a corresponding index, computing motion vectors corresponding to the difference between the image block and the particular reference picture, motion compensating the particular reference picture in correspondence with the motion vectors, multiplying the motion compensated reference picture by the assigned weighting factor to form a weighted motion compensated reference picture, subtracting the weighted motion compensated reference picture from the substantially uncompressed image block, and encoding a signal indicative of the difference between the substantially uncompressed image block and the weighted motion compensated reference picture along with the corresponding index of the particular reference picture.