This Paper presents the 3D wavelet transformation based video compression system, which possesses the capability of progressive transmission by increasing resolution and increasing rate for multimedia applications. The 3D wavelet packet based video compression system removes the temporal correlation of the input sequences using the motion compensation filter and decomposes the spatio-temporal subband using the spatial wavelet packet transformation. The proposed system allocates the higher bit rate to the low frequency image of the 3D wavelet sequences and improves the 0.49dB PSNR performance of the reconstructed image in comparison with that of H.263. In addition to the limitation on the propagation of the motion compensation error by the 3D wavelet transformation, the proposed system progressively transmits the input sequence according to the resolution and rate scalability.