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The direction-adaptive partitioned block transform (DA-PBT) is proposed to exploit the directional features in color images to improve coding performance. Depending on the directionality in an image block, the transform either selects one of the eight directional modes or falls back to the nondirectional mode equivalent to the conventional 2-D DCT. The selection of a directional mode determines the transform direction that provides directional basis functions, the block partitioning that spatially confines the high-frequency energy, the scanning order that arranges the transform coefficients into a 1-D sequence for efficient entropy coding, and the quantization matrix optimized for visual quality. The DA-PBT can be incorporated into image coding using a rate-distortion optimized framework for direction selection, and can therefore be viewed as a generalization of variable blocksize transforms with the inclusion of directional transforms and nonrectangular partitions. As a block transform, it can naturally be combined with block-based intra or inter prediction to exploit the directionality remaining in the residual. Experimental results show that the proposed DA-PBT outperforms the 2-D DCT by more than 2 dB for test images with directional features. It also greatly reduces the ringing and checkerboard artifacts typically observed around directional features in images. The DA-PBT also consistently outperforms a previously proposed directional DCT. When combined with directional prediction, gains are less than additive, as similar signal properties are exploited by the prediction and the transform. For hybrid video coding, significant gains are shown for intra coding, but not for encoding the residual after accurate motion-compensated prediction.