A method and apparatus for clipping a transform coefficient are disclosed. In one implementation, a method is implemented in a video encoder for clipping a quantization level. The method operates by generating the quantization level for a transform coefficient of a transform unit by quantizing the transform coefficient according to a quantization matrix and quantization parameter, determining a clipping condition in the video encoder based on video source bit-depth, and clipping the quantization level according to the clipping condition to generate a clipping-processed quantization level.