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An encoder for high dynamic range (HDR) images is proposed that is compatible with the JPEG2000 compression engine and can provide three different versions of the image to the user at the receiver end depending on his needs. The first version is a gray scale HDR image. The second is a local tone-mapped version of the color HDR image suitable for display on conventional devices. By combining data from the first two versions, the original color HDR image can be reconstructed. The proposed HDR encoder was implemented on a field programmable gate array, and has high enough throughput to support a system processing 1024times768 images at a rate of 60 frames per second.