The lapped orthogonal transform(LOT) has been recently proposed to alleviate the blocking effects in transform coding. The LOT is known to provide an improved coding gain than the conventional transform. In this paper, we propose a prefilter approach to design the LOT bases with the view of maximizing the transform coding gain. Since the nonlinear phase basis is inappropriate to the image coding only the linear phase basis is considered in this paper. Our approach is mainly based on decomposing the transform matrix into the orthogonal matrix and the prefilter matrix. And by assuming that the input is the 1st order Markov source we design the prefilter matrix and the orthogonal matirx maximizing the transform coding gain. The computer simulation results show that the proposed LOT provides about 0.6~0.8 dB PSNR gain over the DCT and about 0.2~0.3 dB PSNR gain over the conventional LOT [7]. Also, the subjective test reveals that the proposed LOT shows less blocking effect than the DCT.