In this paper, we propose a novel interframe coding algorithm especially appropriate for 3-D medical images. The proposed algorithm is based on a video coding algorithm using motion estimation/ compensation and transform coding. In the algorithm, warping is adopted lor motion compensation (MC). Then, by using adaptive mode selection, a motion compensated residual image and original image are mixed up in the wavelet transform domain for improvement in coding performance. The mixed image is then compressed by the zerotree coding method. We prove that the adaptive mode selection technique in the wavelet transform domain is very useful lor 3-D medical image coding. Simulation results show that the proposed scheme provides good performance regardless of inter-slice distance and is prospective for 3-D medical image compression.