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An alternative image decomposition method that exploits prediction via nearby pixels has been integrated on the CMOS image sensor focal plane. The proposed focal plane decomposition is compared to the 2-D discrete wavelet transform (DWT) decomposition commonly used in state of the art compression schemes such as SPIHT and JPEG2000. The method achieves comparable compression performance with much lower computational complexity and allows image compression to be implemented directly on the sensor focal plane in a completely pixel parallel structure. A CMOS prototype chip has been fabricated and tested. The test results validate the pixel design and demonstrate that lossy prediction based focal plane image compression can be realized inside the sensor pixel array to achieve a high frame rate with much lower data readout volume. The features of the proposed decomposition scheme also benefit real-time, low rate and low power applications.