Block-based motion estimation (ME) has been widely used in various video coding standards due to its effectiveness in removing temporal redundancy. However, this traditional ME technique suffers the limitation that it can only compensate for a pure parallel translation between frames. Various algorithms have been proposed for estimating other motion models, such as zooming, rotating, tilting, and warping. In spite of good performance for these algorithms, they are not used in the current industrial world because of their high computational complexity and incompatibility with current block-based video coding standards that limit their practical usage. In this paper, we present a novel zoom motion estimation (ZME) and motion compensation algorithm using the local area scaling technique. To represent and encode the zoom motion, we introduce a zoom vector (ZV) that either increases or decreases a reference block size. The resized reference block is then interpolated to the size of the current block in order to perform block matching. For fast ZME, we have also designed a 3-D diamond pattern search to reduce the number of unnecessary search points for the ZV. We have integrated the proposed algorithm into H.264/AVC JM reference software. Experimental results show that an average bit-rate savings of 11.01% (up to 16.87%) can be achieved for high-definition size sequences with an average 0.20 dB gain in peak signal-to-noise ratio and a less than 10% time increment in the hierarchical B structure.