Images require substantial storage and transmission resources, thus image compression is advantageous to reduce these requirements. The report covers some background of wavelet analysis, data compression and how wavelets have been and can be used for image compression. This project aims at implementing wavelet transform for image compression. The wavelet transform is implemented using Matlab.As the wavelets provide a unique relation between time and scale components of the signal, this property makes wavelets suitable for image compression and also the efficient decomposition of signals prior to compression.