Embodiments are provided herein to achieve video or image sequence encoding with an improved denoising algorithm that is both efficient computationally and has acceptable overhead cost in comparison to other denoising schemes for video encoding. The embodiments include using recursive bilateral filtering as part of the denoising algorithm, which is integrated into a video encoder to overcome limitations of other encoder-integrated denoising algorithms. An embodiment method includes receiving, at a filtering and residual computation function at the encoder, a macro block comprising a plurality of pixels. The filtering and residual computation function also receives, from a motion estimation function at the encoder, a reference block. The reference block comprises a plurality of reference pixels corresponding to the macro block. The filtering and residual computation function further applies a recursive bilateral filter function to each of the pixels of the macro block using the reference pixels of the reference block.