A data compression technique includes a subband decomposition of a source image followed by coding of the coefficients of the resultant subband decomposition for storage and/or transmission. During coding, three ordered lists are used comprising a list of significant pixels (LSP), a list of insignificant pixels (LIP) and a list of insignificant sets of pixels (LIS). The pixels in the LIP are tested, and those that are significant at a current quantization level are moved to the LSP. Similarly, sets are sequentially evaluated following the LIS order, and when a set is found to be significant it is removed from the LIS and partitioned into new subsets. The new subsets with more than one element are added back to the end of the LIS, while the single-coordinate sets are added to the end of the LIP or to the end of the LSP, depending whether they are insignificant or significant, respectively.