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A new approach for digital video enhancement is proposed in order to achieve optimal picture quality for MPEG encoded video. It takes account of the special characteristics of the encoded video by defining a usefulness metric for enhancement (UME). This metric is calculated based on coding information and local spatial features to quantify how much a pixel can be enhanced without boosting coding artifacts. Motion estimation and scene change detection are integrated in the proposed algorithm to improve the temporal consistency. The idea proposed here can be applied to improve the performance of video enhancement algorithms for digital compressed sources. To demonstrate the potential of the new approach, the UME is applied to a spatial-domain sharpness enhancement algorithm. Experimental results show significant improvement with respect to the algorithm without the UME for various video sequences containing coding artifacts. This new approach can be incorporated into future digital video products (e.g. DVD recorders, set-top boxes, digital TVs, etc) in order to achieve superior picture quality for encoded video.