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This paper proposes a low-distortion transform for prediction-error expansion reversible watermarking. The transform is derived by taking a simple linear predictor and by embedding the expanded prediction error not only into the current pixel but also into its prediction context. The embedding ensures the minimization of the square error introduced by the watermarking. The proposed transform introduces less distortion than the classical prediction-error expansion for complex predictors such as the median edge detector or the gradient-adjusted predictor. Reversible watermarking algorithms based on the proposed transform are analyzed. Experimental results are provided.