Multihypothesis motion compensation is extended into the transform domain by using a redundant wavelet transform to produce multiple predictions that are diverse in transform phase. The corresponding inverse transform implicitly combines the multihypothesis predictions into a single spatial-domain prediction for motion compensation such that no side information is needed to describe the combination weights. Additionally, we use a hierarchical search to tailor the motion-vector field to individual phases. Substantial gains in rate-distortion performance are obtained in comparison to an equivalent system using single-phase prediction.