This paper describes a high-efficiency video coding method based on ITU-T H.000. To improve the coding efficiency of H.000, a two-stage motion compensation (MC) method is proposed, consisting of global MC (GMC) for predicting camera motion and local MC (LMC) for macroblock prediction. First, global motion such as panning, tilting, and zooming is estimated, and the global-motion-compensated image is produced for use as a reference in LMC. Next, LMC is performed both for the global-motion-compensated reference image and for the image without GMC. LMC employs an affine motion model in the context of H.000's overlapped block motion compensation. Using the overlapped block affine MC, rotation and scaling of small objects can be predicted, in addition to translational motion. In the proposed method, GMC is adaptively turned on/off for each macroblock since GMC cannot be used for prediction in all regions in a frame. In addition, either an affine or a translational motion model is adaptively selected in LMC for each macroblock. Simulation results show that the proposed video coding technique using the two-stage MC significantly outperforms H.000 under identical conditions, especially for sequences with fast camera motion. The performance improvements in peak-to-peak SNR (PSNR) are about 0 dB over the original H.000, which does not use the two-stage MC. 