A compressed dynamic image encoding device that is: operable to generate a motion vector by searching a reference image read from a frame memory for an image area most similar to an image area of a video input signal to be encoded; operable to generate a motion-compensated reference image as a predicted image, from the motion vector and the reference image read from the frame memory; operable to generate a prediction residual, by subtracting the motion-compensated reference image from the video input signal to be encoded; operable to generate the reference image to be stored in the frame memory, by adding the motion-compensated reference image and the result of processing of orthogonal transform, quantization, inverse quantization, and inverse orthogonal transform performed to the prediction residual; and operable to generate an encoded video output signal by the processing of orthogonal transform, quantization, and variable-length encoding performed to the prediction residual, wherein the reference image comprises on screen reference images (A, B, C) in an on-screen reference image area (INSIDE OF SCREEN) located inside a video display screen, and an off-screen reference image in an off-screen reference image area (OUTSIDE OF SCREEN) located outside the video display screen, wherein the on-screen reference image area (INSIDE OF SCREEN) includes a first reference image, a second reference image, and a third reference image, and the off-screen reference image area (OUTSIDE OF SCREEN) includes an off-screen reference image, wherein the first reference image and the off-screen reference image are adjacent to each other, wherein the second reference image has the same size and shape as the first reference image and is found as the most similar image with the first reference image by searching images within a searched area in the on-screen reference image area (INSIDE OF SCREEN), wherein the third reference image has the same size and shape as the off-screen reference image and is positioned adjacent to the second reference image, wherein a positional relationship between the second reference image and the third reference image is the same as the positional relationship between the first reference image and the off-screen reference image, wherein the off-screen reference image is generated by copying the third reference image and pasting it at the position of the off-screen reference image. operable to generate a motion vector by searching a reference image read from a frame memory for an image area most similar to an image area of a video input signal to be encoded; operable to generate a motion-compensated reference image as a predicted image, from the motion vector and the reference image read from the frame memory; operable to generate a prediction residual, by subtracting the motion-compensated reference image from the video input signal to be encoded; operable to generate the reference image to be stored in the frame memory, by adding the motion-compensated reference image and the result of processing of orthogonal transform, quantization, inverse quantization, and inverse orthogonal transform performed to the prediction residual; and operable to generate an encoded video output signal by the processing of orthogonal transform, quantization, and variable-length encoding performed to the prediction residual, wherein the reference image comprises on screen reference images (A, B, C) in an on-screen reference image area (INSIDE OF SCREEN) located inside a video display screen, and an off-screen reference image in an off-screen reference image area (OUTSIDE OF SCREEN) located outside the video display screen, wherein the on-screen reference image area (INSIDE OF SCREEN) includes a first reference image, a second reference image, and a third reference image, and the off-screen reference image area (OUTSIDE OF SCREEN) includes an off-screen reference image, wherein the first reference image and the off-screen reference image are adjacent to each other, wherein the second reference image has the same size and shape as the first reference image and is found as the most similar image with the first reference image by searching images within a searched area in the on-screen reference image area (INSIDE OF SCREEN), wherein the third reference image has the same size and shape as the off-screen reference image and is positioned adjacent to the second reference image, wherein a positional relationship between the second reference image and the third reference image is the same as the positional relationship between the first reference image and the off-screen reference image, wherein the off-screen reference image is generated by copying the third reference image and pasting it at the position of the off-screen reference image.