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A fast scheme for wavelet-domain interpolation of lost image blocks in wireless image transmission is presented in this paper. In the transmission of block-coded images, fading in wireless channels and congestion in packet-switched networks can cause entire blocks to be lost. Instead of using retransmission query protocols, we reconstruct the lost block in the wavelet-domain using the correlation between the lost block and its neighbors. The algorithm first uses simple thresholding to determine the presence or absence of edges in the lost block. This is followed by an interpolation scheme, designed to minimize the blockiness effect, while preserving the edges or texture in the interior of the block. The interpolation scheme minimizes the square of the error between the border coefficients of the lost block and those of its neighbors, at each transform scale. The performance of the algorithm on standard test images, its low computational overhead at the decoder, and its performance vis-a-vis other reconstruction schemes, is discussed.