In many vision based surveillance systems the video is stored in wavelet compressed form. In this study, an algorithm for moving object and region detection in video that is compressed using a wavelet transform (WT) is developed. The algorithm estimates the WT of the background scene from the WTs of the past image frames of the video. The WT of the current image is compared with the WT of the background and the moving objects are determined from the difference. The algorithm does not perform inverse WT to obtain the actual pixels of the current image nor the estimated background. This leads to a computationally efficient method and a system compared to the existing motion estimation methods.