The discrete cosine transform (DCT) is widely used in many practical image/video compression systems because of its compression performance and computational efficiency. We adopt the DCT and the modified set partitioning in hierachical trees (SPIHT) algorithm that was designed initially for encoding the dis- crete wavelet transform (DWT) coefficients to be suitable to encode DCT coefficients. The algorithm represents the DCT coefficients to concentrate signal energy and proposes a combination and dictator to eliminate the correlation in the same level subband for encoding DCT-based images. To further save bits, subbands with significant coefficients are classified into seven types. The coding complexity of the proposed algorithm for DCT coefficients is just close to JPEG but the performance is higher than JPEG2000. Experimental results indicate that the proposed technique improves the quality of the reconstructed image in terms of peak SNR (PSNR) over SPIHT and JPEG2000 at the same bit rate. © 2005 SPIE and