A method and apparatus of video coding incorporating Deep Neural Network are disclosed. A target signal is processed using DNN (Deep Neural Network), where the target signal provided to DNN input corresponds to the reconstructed residual, output from the prediction process, the reconstruction process, one or more filtering processes, or a combination of them. The output data from DNN output is provided for the encoding process or the decoding process. The DNN can be used to restore pixel values of the target signal or to predict a sign of one or more residual pixels between the target signal and an original signal. An absolute value of one or more residual pixels can be signalled in the video bitstream and used with the sign to reduce residual error of the target signal.