This paper presents an object-based layer-structure very low bit rate video coding system. This system is different from the conventional object-based video coding algorithms in three aspects. First, it uses the elastic stretching technique to do the object-based predictive coding. Second, to reduce the coding cost of the contours, it applies contour matching and contour displacement to predict the contour in the next frame. Third, it uses the arbitrary shape transform (AST) coding to reduce the coding bit rate for the prediction error in the arbitrarily-shaped regions.