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We present a statistical model for characterizing texture images based on wavelet-domain hidden Markov models. With a small number of parameters, the new model captures both the subband marginal distributions and the dependencies across scales and orientations of the wavelet descriptors. Applied to the steerable pyramid, once it is trained for an input texture image, the model can be easily steered to characterize that texture at any other orientation. Furthermore, after a diagonalization operation, we obtain a rotation-invariant model of the texture image. We also propose a fast algorithm to approximate the Kullback-Leibler distance between two wavelet-domain hidden Markov models. We demonstrate the effectiveness of the new texture models in retrieval experiments with large image databases, where significant improvements are shown.