Digital image acquisition device such as CCD/CMOS sensors often introduces random temporal noise into digital video sequences. Temporal noise generally carries high frequency components in both the spatial and temporal domains and is also random in nature. Because of these properties, they are generally very expensive to encode and would substantially degrade coding efficiency. It is therefore important to eliminate or suppress such temporal noise in video inputs prior to encoding. The present invention provides a methodology to achieve such a goal in a highly cost-effective manner where coding performance, latency, computational cost, and memory requirements are optimized. This methodology can be efficiently implemented as part of digital video compression algorithm and scales nicely for various bitrates.