Abstract: Through analysis of the generation mechanism of compression distortion,a visual masking effect based adaptive image compression algorithm that can reduce the "smoothing effect" in low bit rate coding is proposed.For the reason that images should be modeled as non-stationary information resources,blocking wavelet transform is used.The decomposition levels of a block are determined by texture complexity of that block.Experiments by comparing with baseline JPEG2000 show that visual quality in low bit rate coding is improved significantly,and more weak information is reserved.