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The authors propose an embedded wavelet-based image coding algorithm that exploits both the inter- and intra-subband correlations among the wavelet coefficients. The proposed coding algorithm is based on spatial orientation trees (SOT) in which the basic unit is a block of m times n coefficients in contrast to a single coefficient in the set partitioning in hierarchical trees (SPIHT) algorithm. Each SOT has a root node (a block of m times n coefficients) in the LL-subband with the child and descendent blocks in the high frequency subbands. Thus it fuses the features of both block- and tree-based coding algorithms into a single algorithm. Performance of the proposed method is compared (in terms of rate-distortion performance) with the other state-of-the-art coding algorithms including the JPEG2000 for popular test images. Simulation results show that the proposed algorithm has a better coding efficiency over the other coders at very low bit rates. Also, compared with SPIHT it reduces the elements of the auxiliary lists, thereby reducing the memory requirements. In addition, the encoder of the proposed algorithm is significantly faster than that of the SPIHT, but with a slight increase in its decoder complexity.