Abstract— Video compression techniques have been derived to decrease high bit rate. Their possibility to perform this task is quantified by the compression ratio. This compression increasing compression causes an increasing degradation of the video. Utilizes two basic compression techniques, inter frame compression ,compression between frames, designed to minimize data redundancy in successive, intra frame compression occurs within individual frames, designed to minimize the duplication of data in each video. The image enhancement algorithm (retinex) which can be used on frames of the video in order to enhance the video as a whole. This step can be used as a preprocessor to H264 and all the frames can be enhanced using this algorithm and then compression can be performed .