In this paper, we propose a Distance-based Sequence Indexing Method (DSIM) for indexing and searching genome databases. Borrowing the idea of video compression, we compress the genomic sequence database around a set of automatically selected reference words, formed from high-frequency data substrings and substrings in past queries. The compression captures the distance of each non-reference word in the database to some reference word. At runtime, a query is processed by comparing its substrings with the compressed data strings, through their distances to the reference words. We also propose an efficient scheme to incrementally update the reference words and the compressed data sequences as more data sequences are added and new queries come along. Extensive experiments on a human genome database with 2.62 GB of DNA sequence letters show that the new algorithm achieves significantly faster response time than BLAST, while maintaining comparable accuracy.