The present invention relates to an image processing apparatus and method that allow the generation of a high-accuracy prediction image without increasing the processing load.A difference image between motion compensation images MC0 and MC1 extracted from different reference frames is calculated. A low-pass filter is applied to the difference image, and the gain of an obtained image is adjusted. A high-pass filter is applied to an image obtained by the application of a low-pass filter, and the gain of an obtained image is adjusted. An image obtained by adding the output of a gain adjustment circuit 53 and the output of a gain adjustment circuit 55 is added with the motion compensation image MC0, and a prediction image is generated. The present invention can be applied to an apparatus that performs prediction encoding, and an apparatus that decodes information encoded through prediction encoding.