Image compression techniques have been used widely in a variety of applications. In the consideration of image quality and compression ratio, an efficient compression technique is expected. In this paper, we will present a transform-coding-based method by using adaptive classification and coefficient-diffusion techniques to improve image-compression quality while maintaining compression ratio. Experiments are conducted on a wide variety of images. Experimental results reveal that both the image quality and the compression ratio are retained by applying the proposed method. (C) 1997 Elsevier Science B.V.