We present a scalable coding scheme based on discrete wavelet transform (DWT) and MPEG coding for video applications. It utilizes the hierarchical pyramid structure that provides multiple resolutions. DWT decomposes the image into several bands, In each band, a fixed-size motion compensated MPEG coder with custom-designed quantization tables and scanning direction is: employed. This scheme has the advantages of reusing the widely available MPEG hardware and software as well as relieving the limitation of the image size imposed by the MPEG hardware technology. The simulation results show that the DWT-MPEG coding method improves the image quality over ordinary MPEG coding by 0.3 similar to 1.5 dB.