Abstract: Due to rapid technological progress in high dynamic range (HDR) video capture and display, the efficient storage and transmission of such data is crucial for the completeness of any HDR imaging pipeline. We propose a new approach for inter-frame encoding of HDR video, which is embedded in the well-established MPEG-4 video compression standard. The key component of our technique is luminance quantization that is optimized for the contrast threshold perception in the human visual system. The quantization scheme requires only 10--11 bits to encode 12 orders of magnitude of visible luminance range and does not lead to perceivable contouring artifacts. Besides video encoding, the proposed quantization provides perceptually-optimized luminance sampling for fast implementation of any global tone mapping operator using a lookup table. To improve the quality of synthetic video sequences, we introduce a coding scheme for discrete cosine transform (DCT) blocks with high contrast. We demonstrate the capabilities of HDR video in a player, which enables decoding, tone mapping, and applying post-processing effects in real-time. The tone mapping algorithm as well as its parameters can be changed interactively while the video is playing. We can simulate post-processing effects such as glare, night vision, and motion blur, which appear very realistic due to the usage of HDR data.