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The direct use of vector quantization (VQ) to encode LPC parameters in a communication system suffers from the following two limitations: 1) complexity of implementation for large vector dimensions and codebook sizes and 2) sensitivity to errors in the received indices due to noise in the communication channel. In the past, these issues have been simultaneously addressed by designing channel matched multistage vector quantizers (CM-MSVQ). A sub-optimal sequential design procedure has been used to train the codebooks of the CM-MSVQ. In this paper, a novel channel-optimized multistage vector quantization (CO-MSVQ) codec is presented, in which the stage codebooks are jointly designed. The proposed codec uses a source and channel-dependent distortion measure to encode line spectral frequencies derived from segments of a speech signal. Extensive simulation results are provided to demonstrate the consistent reduction in both the mean and the variance of the spectral distortion obtained using the proposed codec relative to the conventional sequentially designed CM-MSVQ. Furthermore, the perceptual quality of the reconstructed speech using the proposed codec was found to be better than that obtained using the sequentially designed CM-MSVQ.