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A number of studies of the motor system suggest that the majority of primary motor cortical neurons represent simple movement-related kinematic and dynamic quantities in their time-varying activity patterns. An example of such an encoding relationship is the cosine tuning of firing rate with respect to the direction of hand motion. We present a systematic development of statistical encoding models for movement-related motor neurons using multielectrode array recordings during a two-dimensional (2-D) continuous pursuit-tracking task. Our approach avoids massive averaging of responses by utilizing 2-D normalized occupancy plots, cascaded linear-nonlinear (LN) system models and a method for describing variability in discrete random systems. We found that the expected firing rate of most movement-related motor neurons is related to the kinematic values by a linear transformation, with a significant nonlinear distortion in about 1/3 of the neurons. The measured variability of the neural responses is markedly non-Poisson in many neurons and is well captured by a "normalized-Gaussian" statistical model that is defined and introduced here. The statistical model is seamlessly integrated into a nearly-optimal recursive method for decoding movement from neural responses based on a Sequential Monte Carlo filter.