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One of the major drawbacks of the block-based DCT compression methods is that they may result in visible artifacts at block boundaries due to coarse quantization of the coefficients. We propose an adaptive approach which performs blockiness reduction in both the DCT and spatial domains to reduce the block-to-block discontinuities. For smooth regions, our method takes advantage of the fact that the original pixel levels in the same block provide continuity and we use this property and the correlation between the neighboring blocks to reduce the discontinuity of the pixels across the boundaries. For texture and edge regions, we apply an edge-preserving smoothing filter. Simulation results show that the proposed algorithm significantly reduces the blocking artifacts of still and video images as judged by both objective and subjective measures.