with the increasing demand of storage and transmission of digital images, image compression is now become an essential applications for storage and transmission. This paper proposes a new scheme for image compression using DWT (Discrete Wavelet Transform) taking into account sub-band features in the frequency domains. Method involves two steps firstly a two levels discrete wavelet transforms on selected input image. The original image is decomposed at different 8x8 blocks, after that apply 2D-Walsh-Wavelet Transform (WWT) on each 8x8 block of the low frequency sub-band. Firstly dividing each sub-band by a factor and then apply Arithmetic Coding on each sub-band independently. Transform each 8x8 block from LL2, and then divide each block 8x8 separated into; DC value and compressed by Arithmetic coding.