The digital revolution has reached hospital operating rooms, giving rise to new opportunities such as tele-surgery and tele-collaboration. Applications such as minimally invasive and robotic surgery generate large video streams that demand gigabytes of storage and transmission capacity. While lossy data compression can offer large size reduction, high compression levels may significantly reduce image quality. In this study we assess the quality of compressed laparoscopic video using a subjective evaluation study and three objective measures. Test sequences were full High-Definition videos captures of four laparoscopic surgery procedures acquired on two camera types. Raw sequences were processed with H.264/AVC IPPP-CBR at four compression levels (19.5, 5.5, 2.8, and 1.8 Mbps). 16 non-experts and 9 laparoscopic surgeons evaluated the subjective quality and suitability for surgery (surgeons only) using Single Stimulus Continuous Quality Evaluation methodology. VQM, HDR-VDP-2, and PSNR objective measures were evaluated. The results suggest that laparoscopic video may be lossy compressed approximately 30 to 100 times (19.5 to 5.5 Mbps) without sacrificing perceived image quality, potentially enabling real-time streaming of surgical procedures even over wireless networks. Surgeons were sensitive to content but had large variances in quality scores, whereas non-experts judged all scenes similarly and over-estimated the quality of some sequences. There was high correlation between surgeons’ scores for quality and “suitability for surgery”. The objective measures had moderate to high correlation with subjective scores, especially when analyzed separately by camera type. Future studies should evaluate surgeons’ task performance to determine the clinical implications of conducting surgery with lossy compressed video.