Abstract: A new image compression optimization algorithm of wavelet and fractal combined coding is proposed in this paper.Through the algorithm, the image is decomposed by wavelet transform and the low frequency subimages are coded separately.During the fractal coding, we make the fractal predicting by the different block size according to the different texture feature of different orientation subimages.At the same time, we used two times matching coding in high frequency subimages.And the matching operations only progress in the same orientation.The experimental results indicate that the optimized algorithm can decrease the fractal coding time greatly and achieve a higher compression rate.