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The LMS algorithm may be used to adapt the coefficients of an adaptive prediction filter for image source encoding. Results are presented which show LMS may provide almost 2 bits per symbol reduction in transmitted bit rate compared to DPCM when distortion levels are approximately the same for both methods. Alternatively, LMS can be used in fixed bit-rate environments to decrease the reconstructed image distortion. When compared with fixed coefficient DPCM, reconstructed image distortion is reduced by as much as 6-7 dB using LMS. Last, pictorial results representative of LMS processing are presented.