This paper offers a fast and simple near-closed-form solution for the least mean-squared-error (LMSE) estimation of the frame-to-frame global subpixel motion in an unsteady image sequence. The offered near-closed-form solution achieves unlimited subpixel accuracy by always employing a small and fixed number of computations, independent of the desired subpixel accuracy. The algorithm is designed so that it is insensitive to frame-to-frame intensity variations, which is a distinctive feature of the method. Experimental results demonstrate the superiority of the proposed method to the spatio-temporal differentiation and surface fitting algorithms under different illumination conditions. This paper furthermore discusses the effect of the proposed image stabilization algorithm on the performance of MPEG-2 video compression. We report that removal of global motion down to subpixel accuracy from an unsteady video improves MPEG-2 compression performance significantly (by at least 1 dB for all frame types), in spite of the fact that motion vectors are differentially encoded in MPEG-2. This result is supported via experimental results using the proposed subpixel registration algorithm and an analysis of the macroblock coding preferences accepted in MPEG-2. (C) 2001 Elsevier Science B.V. All rights reserved.