A motion compensation LSI for realtime MPEG1/H.261 video encoding has been developed. This LSI employs a compact motion estimator that consists of vector search array processors. Furthermore, an efficient motion vector search strategy that enables bidirectioanl searches with a -16.0/+15.5 pels range is adopted to maintain encoded picture quality. The adopted strategy takes two steps. The first step is the full search for 2-pel precision vectors within the range of 16 pels. A 4-to-1 sub-sampling technique with a low pass filter is employed in this step. The second step is the full search for half-pel precision vectors within a 1.0 pels search range centered on the location pointed by the best 2-pel precision vectors. This strategy is compared with the exhaustive-search strategy. It is shown that the number of operations and external memory access cycles are reduced to 1/11 and 1/2, respectively, while differences of the signal to noise ratios obtained by simulation are within 0.2 dB. Those reductions contribute to lowering power dissipation. The array processors calculate the values of distortion. They accumulate the absolute differences between current and reference data with a feedback loop to keep the number of processor elements equal to the number of pels in a row of the current block. Multiple reference data buses and a delay line in the feedback loop have been introduced for efficient calculation. In addition, cascade connection of the array processors is studied to shorten calculation periods. This LSI controls input frames reordering buffers and reference frames buffers. It generates the prediction and the prediction error blocks as well as the motion vectors. AC power of current blocks and the values of distortion are obtained for the bit rate control. This LSI is fabricated using 0.8 µm 2-level metal CMOS technology and dissipates 2.0 W from 5 V supply at 36 MHz.