Disclosed herein is a method for encoding a video signal having at least one frame with a plurality of blocks having pixels. The method includes determining motion vectors for a first block in the at least one frame and at least some of the blocks that are neighbors to the first block, identifying neighboring blocks having motion vectors that are similar to the motion vector of the first block, assigning the first block and the identified neighboring blocks to a segment using a processor, applying a segment parameter to at least one block in the segment and encoding the at least one block using the segment parameter.