The use of block transforms for coding intra-frames in video coding may preclude higher coding performance due to residual correlation across block boundaries and insufficient energy compaction, which translates into unrealized rate-distortion gains. Subjectively, the occurrence of blocking artifacts is common. Post-filters and lapped transforms offer good solutions to these problems. Lapped transforms offer a more general framework which can incorporate dinated pre- and post-filtering operations. Most common are fixed lapped transforms (such as lapped orthogonal transforms), and also transforms with adaptive basis function length. In contrast, in this paper we determine a lapped transform that non-linearly adapts its basis functions to local image statistics and the quantization regime. This transform was incorporated into the H.264/AVC codec, and its performance evaluated. As a result, significant rate-distortion gains of up to 0.45 dB (average 0.35dB) PSNR were obtained compared to the H.264/AVC codec alone.