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An embedded image compression scheme using the discrete multiwavelet transform (DMWT) is proposed. The proposed coding scheme is based on a new prefilter design for DMWT and a new embedded coding algorithm which combines scalar quantization and 2×2 vector quantization (VQ). A new algorithm for embedded VQ codebook generation is proposed, which is shown to have a better performance than the current schemes. The performance of the proposed compression scheme is comparable to the one of the SPIHT algorithm