An image processing apparatus that properly sets a moving image area according to an image. An image processor generates a combined image, by setting one of a plurality of images as a basic image and disposing a moving image generated from the plurality of images in a moving image area which is designated in part of the basic image. The image processor sets a still area in part of the basic image. A system controller causes the basic image to be displayed on a display section. A user performs a touch operation on the display section displaying the basic image, whereby the moving image area is designated. When the moving image area is designated in a manner overlapping the still area, the image processor performs image combining by deleting the overlapping area from the moving image area.