The authors consider the encoding of image subbands with a tree code that is asymptotically optimal for Gaussian sources and the mean squared error (MSE) distortion measure. They first prove that optimal encoding of ideally filtered subbands of a Gaussian image source achieves the rate distortion bound for the MSE distortion measure. The optimal rate and distortion allocation among the subbands is a by-product of this proof. A bound is derived which shows that subband coding is closer than full-band coding to the rate distortion bound for a finite length sequence. The tree codes are then applied to encode the image subbands, both nonadaptively and adaptively. Since the tree codes are stochastic and the search of the code tree is selective, a relatively few reproduction symbols may have an associated squared error a hundred times larger than the target for the subband. Correcting these symbols through a postcoding procedure improves the signal-to-noise ratio and visual quality significantly, with a marginal increase in total rate.