Abstract: In this paper, we propose a new study to image compression based on the principle of Shapiro`s Embedded Zerotree Wavelet (EZW) algorithm. Our study, the modified EZW (MEZW), distributes entropy differently than Shapiro`s and also optimizes the coding. This study can produce results that are a significant improvement on the PSNR and compression ratio obtained by Shapiro, without affecting the computing time. These results are also comparable with those obtained using the SPIHT and SPECK algorithms.