A decoder-side motion vector derivation algorithm for hybrid video coding is proposed. The algorithm is based on template matching and aims to reduce motion parameter bit-rate by re-estimating the applicable motion parameters at the decoder side. An average bit-rate savings of about 6%-8% is observed compared to the reference H.264/AVC. Decoder-side motion vector derivation was included in multiple proposals for the new High Efficiency Video Coding standard. This paper details and analyzes the algorithm and discusses its relation to other coding tools.