A method of coding speech under background noise conditions or during noise-like speech periods wherein during active voice speech segments an analysis-by-synthesis method is used. However, when a background noise segment or noise-like speech segment is detected, an adaptive code book (pitch prediction) contribution is used as a source of a pseudo-random sequence in order to provide a better representation of the background noise or the noise-like speech. An improved gain quantization scheme is also employed when a background noise segment is detected, wherein energy of the total excitation with quantized gains is matched to the energy of total excitation with unquantized gains.