In this paper, a new video compression technique based on adaptive hybrid wavelets and directional filter banks is proposed to achieve both high coding efficiency and good reconstruction quality at very low-bit rates. A key application is the real-time transmission of video from an autonomous underwater vehicle to a surface station, e.g., for man-in-the-loop monitoring and inspection operations, through acoustic channels that have limited bandwidth. The proposed method can maintain details in texture regions at relatively low bit rates, while overcoming the ringing artifacts within smooth regions, for intra-frame coding. For inter-frame coding, improved efficiency is achieved by making use of: 1) a new spatio-temporal just-noticeable-distortion model to remove perceptual redundancy; 2) motion interpolation to reduce bit rate; 3) variable-precision in quantizing the residual error; and 4) block inter-leaver to reduce transmission errors. Experiments with underwater video sequences are presented to assess the effectiveness of the proposed approach, in comparison to traditional wavelet-based techniques.