An image compression algorithm,which is suit for digital neutron radiography system,is proposed.By integrating wavelet with directional filter banks(DFB),a non-redundant image tranform that is named WDFB is realized.By recombining the coefficients of WDFB,a novel image compression scheme is proposed;the scheme is similar to the listless zerotree coding(LZC).In order to utilize the good performance of WDFB in estimating 2-D piecewise smooth functions,this algorithm introduces the linear indexing technique and adopts zerotree representation strategy which is different from LZC.The experiments demonstrate that the proposed algorithm is efficient in coding neutron radiography images.At same compression rate,the new algorithm outperforms LZC both visually and in terms of the PSNR values.The simulation results also show that the proposed algorithm is competitive to SPIHT algorithm and outperforms SPIHT in terms of hardware implementation.