This paper proposes a new ABTC (Adaptive Block Truncation Coding) algorithm which improves the BTC algorithm for image data compression. A new adaptive block truncation coding which adopts a selective coding scheme depending on the local characteristics of an image has been described. The characteristics of the ABTC algorithm can be summarized as high compression ratio and the algorithm simplicity. Using this algorithm, color images can be coded at a variable bit rate from 1.0 (bit/pel) to 2.56 (bit/pel) and high compression rate (1.3-105 bit/pel) can be achieved without conspicuous image degradation compared with original images.