A method for performing hybrid multihypothesis prediction during video coding of a coding unit includes: processing a plurality of sub-coding units in the coding unit; and performing motion vector derivation of a portion of the sub-coding units. More particularly, the step of performing motion vector derivation of the portion of the sub-coding units further includes: deriving a plurality of motion vectors for multihypothesis motion-compensated prediction of a specific sub-coding unit of the portion of the sub-coding units from at least one other sub-coding/coding unit or by performing motion estimation. The method further includes performing multihypothesis motion-compensated prediction on the specific sub-coding unit according to the plurality of motion vectors, and more particularly, includes utilizing a linear combination of a plurality of pixel values derived from the plurality of motion vectors as a predicted pixel value of the specific sub-coding unit. An associated apparatus is also provided.