This paper presents a new region-oriented algorithm for segmentation and motion estimation as an image processing algorithm for improving picture quality of a given input moving image sequence. Usually, a segmentation process is introduced into a motion estimation method to locate motion boundaries, and then motion analysis will be constrained not to combine local estimates across such boundaries. However, the segmentation presents its own problem. The only information on which the segmentation is based is sometimes the image motion estimates themselves. Thus, good quality motion analysis depends on image segmentation, whereas good quality segmentation depends in turn on motion estimation. Therefore, the segmentation problem is extremely difficult to solve separately from the motion estimation problem. To solve the segmentation problem along with the motion estimation problem simultaneously, this paper develops a region-oriented algorithm. The preliminary experiments demonstrate that the region-oriented algorithm works well and is promising.