The conventional fractal image compression methods have high computational complexity at encoding reduce PSNR at low bit rate and havehighly visible blocking effects in a reconstructed image. In this paper we propose a fractal image compression method based on disctete wavelet transform domain, which takes the absolute value of discrete wavelet transform coefficient, and assembles the discrete wavelet tranform coefficients of different highpass subbands corresponding to the same spatial block and then applies "0" encoding according to the energy of each range blocks. The proposed method improved PSNR at low bit rate and reduced computational complexity at encoding distinctly. Also, this method can achieve a blockless reconstructed image and perform hierarchical decoding without recursive constractive transformation. Computer simulations with several test images show that the proposed method shows better performance than convnetional fractal coding methods for encoding still pictures. pictures.