Frame rate up conversion (FRUC) methods that employ motion have been proven to provide better image quality compared to nonmotion-based methods. While motion-based methods improve the quality of interpolation, artifacts are introduced in the presence of incorrect motion vectors. In this paper, we study the design problem of optimal temporal interpolation filter for motion-compensated FRUC (MC-FRUC). The optimal filter is obtained by minimizing the prediction error variance between the original frame and the interpolated frame. In FRUC applications, the original frame that is skipped is not available at the decoder, so models for the power spectral density of the original signal and prediction error are used to formulate the problem. The closed-form solution for the filter is obtained by Lagrange multipliers and statistical motion vector error modeling. The effect of motion vector errors on resulting optimal filters and prediction error is analyzed. The performance of the optimal filter is compared to nonadaptive temporal averaging filters by using two different motion vector reliability measures. The results confirm that to improve the quality of temporal interpolation in MC, the interpolation filter should be designed based on the reliability of motion vectors and the statistics of the MC prediction error.