An effective compression algorithm of multispectral images based on discrete wavelet transform(DWT)and improved Kar h unen-Loeve transform (KLT) is proposed in this paper.It could achieve better performance with effective combination of the two methods which c onvert the energy of images to a small number of coefficients.In order to reduce the most redundancy of space,it deals with each spectrum using fast 9/72-D DWT firstly.Then the spectral 1-D KLT is appl ied on the 2-D DWT coefficients to reduce spectral redundancy and spatial redundancy remnantly.Fin ally,entropy coding is executed to obtain the compressed code stream.Within 0.25-2.0bit/pixel range,t he average peak signal to noise ratio (SNR) of the proposed compression algorithm could be impro ved greatly compared with other approaches,which reduces the operating time and improves the per formance of multi-spectral image compression algorithm,verifies the correctness and feasib ility of our method.The work in this paper has a good reference value for simila r cases.