Even though CIF-resolution video decoding in software has become popular, as evidenced by the popularity of MPEG-1 software decoders, video encoding at CIF resolution still needs hardware solution, especially with motion estimation. In this paper, we report our work of a high-quality and high-performance software-only H.261 video codec, with real- time transport protocol packetization capability, for H.323 video conferencing over LAN. The codec is implemented entirely in software using Ultra SPARC multimedia instruction extension - visual instruction set or VIS. The encoder can perform in real time change detection, motion estimation, motion-compensated spatio-temporal pre-filtering for noise reduction and adaptive quantization. Thus high quality video can be obtained at rate of 128 Kbits per second or even at a lower rate. It is capable of performing simultaneous encoding and decoding of near CIF resolution video at 15 frames per second. The design of encoder structure, data layout, and various techniques and algorithms developed can be extended to H.263 codec.