A method of and apparatus for encoding and decoding a signal by illumination change compensated motion estimation are provided. The apparatus for encoding a signal by illumination change compensated motion estimation includes: an illumination change compensation unit performing compensation for an illumination change by performing a differential calculation between each pixel value of a current block and the means pixel value of a reference block indicated by a motion vector of the current blok and the mean pixel value of the reference block; a residual signals generation unit generating redisual signals based on the blocks in which illumination change compensation is performed; and an illumination changed amount prediction unit performing differential pulse code modulation (DPCM) based on the illumination change amount prediction value by reflecting the closeness between neighboring blocks in which illumination change occurs.