In this thesis, we propose a new coding mode in H.264/AVC B-frame. The new mode consists of two parts: predictor and residual part. The predictor is generated by motion-compensated frame interpolation (MCFI), and the residual part is calculated in encoder-side and is transmitted. The MCFI algorithm is formed by state-of-the-art dense true motion estimation and dense motion compensation (DMC). The predicting procedure needs no information in decoder-side, so the entropy is cut down to the minimum. The proposed new mode is integrated into H.264 JM17.2, and has three different block sizes: 16x16, 8x8, and 4x4. Since the new mode predictor achieves quite well qualities than H.264/AVC in good amount of region, and the proposed new mode takes significant percentages in several sequences, the new proposed mode is quite promising in video coding and worth further studying.