First generation image coding standards are now well-established and coders based on these standards are commercially available. However, for emerging applications, good quality at even lower bitrates is required. Ways of exploiting higher level visual information are currently being explored by the research community in order to achieve high compression. Unfortunately very high level approaches are bound to be restrictive as they are highly dependent on the accuracy of lower-level vision operations. Region-based coding only relies on mid-level image processing and thus is viewed as a promising strategy. In this work, substantial advances to the field of region-based video compression are made by considering the complete scheme. Thus, improvements to the failure regions coding and the motion compensation components have been devised. The failure region coding component was improved by predicting the texture inside the failure region from the neighbourhood of the region. A significant gain over widely used techniques such as the SA-DCT was obtained. The accuracy of the motion compensation component was increased by keeping an accurate internal representation for each region both at the encoder and the decoder side. The proposed region-based coding system is also evaluated against other systems, including the MPEG4 codec which has been recently approved by the MPEG community.