Image compression is performed to reduce the bit rate for image transmission and the required storage in the case of image archival. Typically, it involves a transformation of the image to reduce the correlation and redundancy between pixels. The wavelet transform has gained wide acceptance as a tool to decorrelate most image sources. The transformed image is decomposed at different scales of details and approximation. Such decomposition facilitates image compression and progressive transmission. In this study, a system and method for image compression is presented based on the wavelet transformation. A threshold is determined adaptively based on the desired compression ratio and only significant coefficients are retained.