In this paper, a novel multiresolution algorithm for low bit-rate image compression is presented. High quality low bit-rate image compression is achieved by first decomposing the image into approximation and detail subimages with a shift-orthogonal multiresolution analysis. Then, at the coarsest resolution level, the coefficients of the transformation are encoded by an orthogonal matching pursuit algorithm with a wavelet packet dictionary. Our dictionary consists of convolutional splines of up to order two for the detail and approximation subbands. The intercorrelation between the various resolutions is then exploited by using the same bases from the dictionary to encode the coefficients of the finer resolution bands at the corresponding spatial locations. To further exploit the spatial correlation of the coefficients, the zero trees of wavelets (EZW) algorithm [I] was used to identify the potential zero trees. The coefficients of the presentation are then quantized and arithmetic encoded at each resolution, and packed into a scalable bit stream structure. Our new algorithm is highly bit-rate scalable, and performs better than the segmentation based matching pursuit [2,3] and EZW encoders at lower bit rates, based on subjective image quality and peak signal-to-noise ratio (PSNR).