The quality of compressed images can be remarkabley improved if the dictates of the Human Visual System (HVS) requirements are followed. To achieve this goal, our strategy is to exploit human visual masking effect using a subband decomposition. A combination of both intra channel and inter channel masking property is then performed. This scheme exploits the lowpass character of the perceptual masking for natural color images in estimating the amount of available masking. Results obtained show an improvement of the quality of reconstructed color images compared to existing compression schemes like standard JPEG2000.