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This paper describes a new improvement upon a video coding tool known as reduced-resolution update (RRU). In RRU, as described in Annex Q of the H.263 standard, full resolution prediction error residuals are downsampled and coded at a reduced spatial resolution. During RRU coding, as previously proposed, each block of prediction errors is downsampled and interpolated without reference to any of its neighboring blocks. This can lead to severe blockiness in the decoded picture. In H.263 Annex Q RRU, the deblocking filter strength is increased to the maximum value to reduce this blockiness. In the new technique presented here, referred to as RRU+, the downsampling and interpolation filters use residuals from neighboring blocks to prevent the blockiness that results from RRU. Experimental results show that RRU+ provides better PSNR versus bitrate performance than RRU with maximum deblocking filter strength.