Modern image/video compression techniques greatly help to store and transmit digital images and video data. Discrete wavelet transform is used in JPEG2000 because of its scalability and tolerable degradation. In H.264/AVC, predictive coding is employed to remove spatial redundancy before discrete cosine transform. In this paper, we propose a new encoder structure combining both advantages from JPEG2000 [1] and H.264/AVC [2], which firstly utilizes the proposed spatial transform to decompose a single image into several sub-images and then employs motion compensation to convert the conventional spatial decorrelation into temporal decorrelation. Experimental results show that our proposed method outperforms the state-of-the-art image coding algorithms and achieves better rate-distortion performance.