Abstract: This paper presents a new strategy for efficiently coding stereo video sequences. In the scheme, the auxiliary sequence is coded by disparity compensated prediction and 3D-SPIHT algorithm. 3D-SPIHT algorithm is based on genuine 3D wavelet transform, and implements a three dimensional extension of SPIHT in still image coding by defining a new spatio-temporal orientation tree structure. The scheme can provide comparable performance to the conventional method with minimal computational complexity and produce an embedded bit stream in the auxiliary sequence. According to channel bandwidth, the bit rate can be adaptively adjusted so that the best quality of the auxiliary sequence is obtained.