In this paper, an image coding scheme using removal of isolated coefficients and quadtree structure in wavelet transformed domain, is suggested. The number of significant coefficients can be reduced by quantizing in different stages according to the weights of the each band. The quadtree structure preseves the location information while significantly reducing the number of bits required to represent the locality of an image. To increase the efficienty of the wavelet transformed images using quadtree, the energy of the isolated coefficients is analyzed and those with low energy are eliminated. Furthermore, to control the bit rate the entropy of each block is sorted according to its energy concentration and the number of bits required for encoding, and the blocks with low energy are removed to achieve the desired compression rate.