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The PACS plays an important role in the medical diagnosis and treatment and its importance has been recognized. An effort has been made toward a more efficient and convenient image communication and manipulation. Since some key technologies have not been achieved, PACS is not mature yet in China. This paper presents a small-scale PACS incorporating a lossless compression method. The architecture, storage strategy, standards in which it involves, and functional modules are described briefly. The paper discusses a new lossless compression method which based on a new predictive model and revised from a former coding algorithm. The method of image transmission based on TCP/IP is also introduced. The implementation shows that the scheme is feasible, the compression method performs well in medical images and the transmission method can support both single-point and multi-points communication successfully.