A digital image stabilization method that integrates a digital stabilization device and a digital video encoder is disclosed. The digital stabilization device comprises a determining module for determining background regions, a comparison module for calculating motion vectors, and an adjustment module for adjusting jerky image motion in frames. When there are frame jiggles, the motion vector between an I frame and a P frame is used for motion estimation to get a first motion vector and also define a background region of the P frame. Next, a second motion vector of a B frame is calculated according to the background region to adjust jerky motion of the P frame and the B frame for stabilization. The next P frame then uses the background region of the preceding P frame as its background region.