The present invention relates to an image processing apparatus and method that can generate a high-accuracy prediction image with a small amount of control information.A motion compensation circuit 51 specifies a macroblock corresponding to a prediction image in a reference frame other than a current frame using a motion vector supplied from a prediction mode determination circuit 41. The motion compensation circuit 51 reads an image of the specified macroblock from a frame memory 19, and extracts the read image as a motion compensation image. An intra-prediction circuit 52 performs intra-prediction on the current frame using an arbitrary method to generate an intra-prediction image IP. The present invention can be applied to, for example, an encoding apparatus and a decoding apparatus.