In this paper, a distributed video coding technique with prioritized channel coding of W-Z frames is presented. In the proposed framework, W-Z frame macroblocks are classified into different groups based on the estimated quality of the side information. The information is transmitted via uplink channel back to the encoder so that macroblocks with similar error statistics can be grouped tighter in same coding blocks for channel coding. With this approach, decoder can request more parity bits to correct macroblocks whose side information quality is worse and request less parity bits for macroblocks with smaller side information errors. Initial experimental results show that the proposed technique can improve the R-D performance of both pixel-domain and transform-domain DVC codecs considerably.