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Through research for image compression based on wavelet analysis in recent years, we put forward an adaptive wavelet decomposition strategy. Whether sub-images are to be decomposed or not are decided by their energy defined by certain criterion. Then we derive the adaptive wavelet decomposition tree (AWDT) and the way of adjustable compression ratio. According to the feature of AWDT, this paper also deals with the strategies which are used to handle different sub-images in the procedure of quantification and coding of the wavelet coefficients. Through experiments. not only the algorithm in the paper can adapt to various images, but also the quality of recovered image is improved though compression ratio is higher and adjustable. When their compression ratios are near the quality of subjective vision and PSNR of the are better than those of JPEG algorithm.