Conventional MPEG decoders require about 16 Mbits of external memory to contain the input buffer, the two usual reference frames, and the B-information. As proposed earlier, about 2,8 Mbit in memory capacity can be saved by omitting the storage of B-information. The system, provides a further exchange between memory capacity and internal processing, to effect MPEG decoding, with only one reference frame stored in memory. All B and P information required for the reconstruction of display information which cannot directly be retrieved from memory is decoded instantaneously. Three decoding sub-steps are provided, a first decoding sub-step for the macroblock parameters, a second decoding sub-step for the picture elements according to a decoding-on-the-fly principle, and a third decoding sub-step for updating of the earlier reference frame after decoding of a later reference frame.