This paper proposes a wavelet transform- based image compression method using the energy distribution. The proposed method Involves two steps. First, we use a wavelet transform for the subband decomposition. The original image Is decomposed into one low resolution subimage and three high frequency subimages. Each high frequency subimages have horizontal, vertical, and diagonal directional edges. The wavelet transform is luther applied to these high frequency subimages. Resultant transformed subimages have different energy distributions corresponding to different orientation of the high pass filter. Second, for higer compression ratio and computational effciency, we discard some subimages with small energy. The remaining subimages are encoded using either DPCM or quantization followed by entropy coding. Experimental results show that the proposed coding scheme has better performance in the peak signal to noise ratio(PSNR) and higher compression ratio than conventional image coding method using the wavelet transform followed by the straightforward vector quantization.