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In this paper, a watermarking scheme, called majority-parity-guided error-diffused block truncation coding (MPG-EDBTC), is proposed to achieve high image quality and embedding capacity. EDBTC exploits the error diffusion to effectively reduce blocking effect and false contour which inherently exhibit in traditional BTC. In addition, the coding efficiency is significantly improved by replacing high and low means evaluation with extreme values substitution. The proposed MPG-EDBTC embeds a watermark simultaneously during compression by evaluating the parity value in a predefined parity-check region (PCR). As documented in the experimental results, the proposed scheme can provide good robustness, image quality, and processing efficiency. Finally, the proposed MPG-EDBTC is extended to embed multiple watermarks and achieves excellent image quality, robustness, and capacity. Nowadays, most multimedia is compressed before it is stored. It is more appropriate to embed information such as watermarks during compression. The proposed method has been proved to solve effectively the inherent problems in traditional BTC, and provide excellent performance in watermark embedding.