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The output of recently developed imaging devices is more often in a digital format and both storage space and transmission times of these images profit from data compression. In this paper a novel approach to medical image compression based on three-dimensional Discrete Cosine Transformation (DCT) is proposed. The basic idea is to de-correlate similar pixel blocks through three-dimensional DCT transformation. A number of adjacent pixel blocks are grouped together to form a three-dimensional data cube. Each data cube is 3D DCT transformed, quantized, and Entropy coded (using Variable length coding scheme-Huffman coding scheme). An experimental result says that the new approach is effective specifically for medical images.