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A novel image encoding algorithm is presented based on lower tree to solve the problems such as low speed, huge capacity, repeated calculation in advanced compression codings. It is an efficient method of grouping the coefficients, coding them and reconstructing them based on the correlation of the wavelet coefficients in multiresolution. And an improved algorithm is proposed. The experimental result shows that the improved algorithm increases the coding speed, reduces the memory and improves the image recovery quality, so it is an efficient method for image encoding.