An enhanced motion estimation scheme is incorporated into the interframe wavelet coding architecture in this paper. Interframe wavelet coding has the advantage of SNR, temporal, and spatial scalability, and is a potential candidate for the on-going MPEG-21 scalable video coding standard. Motion-compensated temporal filtering (MCTF) is one of its essential components. Therefore, motion estimation plays an important role in deciding the coding performance. In this paper, we modified the motion estimation syntax/scheme originally specified in the MPEG Advanced Video Coding (AVC) and use it in the inter-frame wavelet structure. Besides, the techniques of I-block, bi-directional motion estimation, λ-value adjustment and motion information partitioning are employed. Simulation results show very promising performance particularly on subjective quality.