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In this paper, a residual image coding scheme for stereo image compression is presented. With standard block matching method, the residual image is obtained first. For each residual block, an initial vector space, which contains the blocks alongside its matched block and a subset of edge blocks, is constructed. Then, a set of orthogonal basis vectors is selected one by one so that the residual block can be represented by a linear combination of them. Experimental results show that comparing with the widely used DCT based scheme, the proposed method significantly reduce the number of coefficients.