This paper proposes a new motion compensation method using "sliced blocks" in DCT-based hybrid video coding. In H.264 | MPEG-4 Advance Video Coding, a brand-new international video coding standard, motion compensation can be performed by splitting macroblocks into multiple square or rectangular regions. In the proposed method, on the other hand, macroblocks or sub-macroblocks are divided into two regions (sliced blocks) by an arbitrary line segment. The result is that the shapes of the segmented regions are not limited to squares or rectangles, allowing the shapes of the segmented regions to better match the boundaries between moving objects. Thus, the proposed method can improve the performance of the motion compensation. In addition, adaptive prediction of the shape according to the region shape of the surrounding macroblocks can reduce overheads to describe shape information in the bitstream. The proposed method also has the advantage that conventional coding techniques such as mode decision using rate-distortion optimization can be utilized, since coding processes such as frequency transform and quantization are performed on a macroblock basis, similar to the conventional coding methods. The proposed method is implemented in an H.264-based P-picture codec and an improvement in bit rate of 5% is confirmed in comparison with H.264.