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The noise model is one of the most important aspects influencing the coding performance of Distributed Video Coding. This paper proposes a novel noise model for Transform Domain Wyner-Ziv (TDWZ) video coding by using clustering of DCT blocks. The clustering algorithm takes advantage of the residual information of all frequency bands, iteratively classifies blocks into different categories and estimates the noise parameter in each category. The experimental results show that the coding performance of the proposed cluster level noise model is competitive with state-of-the-art coefficient level noise modelling. Furthermore, the proposed cluster level noise model is adaptively combined with a coefficient level noise model in this paper to robustly improve coding performance of TDWZ video codec up to 1.24 dB (by Bjontegaard metric) compared to the DISCOVER TDWZ video codec.