This paper presents an efficient compound image compression approach based on H.264/AVC intra coding. The text blocks are distinguished from the picture blocks and compressed with a new coding mode. In particular, the text blocks are represented by base colors and index map in spatial domain. A color quantization algorithm optimized for compression is designed to generate this representation. As for the entropy coding of text blocks, a structure-aware context-based arithmetic coder is developed. The mode selection algorithm based on rate distortion optimization is used to select the text blocks along with H.264/AVC intra modes, which can adapt to the targeted bit-rate. Experimental results show that the proposed scheme can achieve 2.8dB gain on average for compound images compared with H.264/AVC intra coding.