An efficient compression scheme for color-quantized images based on progressive coding of color informationhas been developed. Rather than sorting color indexes into a linear list structure,a binary-tree structureof color indexes is proposed. With this structurethe new algorithmcan progressively recover an image from 2 colors up to all of the colors contained in the original image, i.e., a lossless recovery achieved. Experimental results show that it can efficiently compress images in both lossy and lossless cases. Typically for color-quantized Lena image with 256 colors, the algorithm achieved 0.5 bpp lower than state-of-the-art losslesscompres.sionmethods while preservingthe efficient lossy compression. Such a compression scheme is very attractive to many applications that require the ability to fast browsing or progressive transmission, and if necessary, to exactly recover the original image.