A method and apparatus for non-linear prediction filtering are described. The method may include performing motion compensation to generate a motion compensated prediction using a block from a previously coded frame. The method may also include performing non-linear filtering on the motion compensated prediction in the transform domain with a non-linear filter as part of a fractional interpolation process to generate a motion compensated non-linear prediction. The method may also include subtracting the motion compensated non-linear prediction from a block in a current frame to produce a residual frame, and coding the residual frame.