A new gray-scale image coding technique has been developed, in which an extended DPCM approach has been combined with entropy coding. This technique has been implemented in a freeze-frame videoconferencing system which is now operational at IBM sites throughout the world. Following image preprocessing, the two fields of the interlaced 512 × 480 pixel video frame are compressed sequentially with different algorithms. The reconstructed image quality is improved by subsequent image postprocessing, the final reconstructed image being almost indistinguishable from the original image. Typical gray-scale video images compress to about a half bit per pixel and transmit over 4.8 kbit/s dial-up telephone lines in about a half minute. The gray-scale image processing and compression algorithms are described in this paper. Copyright © 1986 by The Instilute of Electrical and Electronics Engineers, Inc.