A method and apparatus for occlusion area detection based on block difference associated with a motion vector and a predicted block difference are disclosed. For each current block of a frame, motion estimation is performed based on a temporally previous frame and a temporally subsequent frame. Based on the motion vector derived, two reference blocks of the current block are located in the temporally neighboring frames. The block difference between these two reference blocks is calculated for the current block. By comparing the block difference with a predicted block difference of the current block, the current block is determined to be an occlusion block or not accordingly. The predicted block difference is updated by averaging the block difference of neighboring blocks in a non-motion boundary area.