An efficient compression technique that is particularly attractive for the storage of large commercial files and the transfer of such files within a distributed communication network is outlined. The technique, constructed as a two-level hierarchy of Huffman-type binary trees, is a reversible semantic-independent variable-length character encoding method that makes use of the group locality of character reference behavior and the variable frequency of occurrence of various characters within the different subgroupings of the character set The compression efficiency and cost of the Multi-Group scheme has been found to be superior to the well-known Huffman encoding algorithm.