Abstract Measurement-While-Drilling (MWD) services efficiently support drilling decisions, therefore these tools are becoming a de-facto standard on well sites. Currently, the main drawback of MWD equipment is the absence of a high bit-rate telemetry system to enable real-time activities. This problem may be solved by employing either an off-line solution, with limited memory capacity up to few hundreds of Mbytes; or an on-line solution with telemetry at a very low bit-rate (tens of bits/sec). However, following the off-line approach with standard acquisition parameters, the internal storage memory would be filled up in just a few hours at high acquisition rates. On the contrary, with the on-line solution only a small portion of the acquired signals (or only alarm information about potentially dangerous events) can be transmitted in real-time to the surface by using mud-pulse telemetry. In this paper, we present a lossy data compression algorithm based on the wavelet transform (WT), which is suitable for downhole implementation and may be successfully applied to both on-line and off-line solutions. Numerical tests based on real field data achieve compression ratios up to 15:1 without noticeable signal degradation. This allows a significant increase in downhole time acquisition and in real-time information that can be transmitted through mud-pulse telemetry.