In this paper, an adaptive cosine transform coding scheme which incorporate human visual properties into the coding scheme is investigated. Human vision is relatively sensitive to mid-frequency band, and insensitive to very low and very high frequency band. These property was mathematically modelled with MTF(Modulation Transfer Function) through many psychovisual experiment. DCT transforms energy in spatial domain into frequency domain, so can exploit the MTF very efficiently. Another well-known visual characteristics is spatial masking effect that visibility of noise is less in regions of high activity than in regions of low activity. Proposed coding scheme imploys quantization matrix which represent the properties of these spatial frequency response of human vision, and adaptively quality of an image. To compute the activity index of an image block, simple operation is performed in spatial domain, and according to activity index. block of low activity region is more exactly quantized relatively than that of high activity region. Results showed that, at low bit rate, the subjective quality of the reconstructed images by proposed coding scheme is acceptible than that of coding scheme without HVS properties.