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A video encoder/decoder (CODEC) performs video data compression by having combination of three main modules such as motion estimation and compensation, transformation, and entropy encoding. Among these three modules, transformation is the module of removing the spatial redundancy that exists in the spatial domain of video sequence. Discrete cosine transformation (DCT) is the defacto transformation method in existing image and video coding standards. DCT is a popular transformation technique for intra and inter frame video coding. Even though it has high energy preserving and correlation properties, it suffers from blocking artifacts. This problem affects the performance of other subsequent modules involved in the video CODEC. To overcome this problem, a hybridization method has been incorporated in transformation module of video CODEC. This paper presents an improvement in the transformation module by incorporating DCT as transformation technique for inter frames and discrete wavelet transform for intra frames of video sequence. This proposal is also applied in the existing H.264/AVC standard. Extensive experiments have been conducted with various low-bit rate video sequences. The results show that the proposed technique outperforms the existing transformation technique used in the H.264/AVC considerably.