The transform and hybrid transform/DPCM methods of image coding are generalized to allow pyramid vector quantization of the transform coefficients. An asymptotic mean-squared error performance expression is derived for the pyramid vector quantizer and used to determine the optimum rate assignment for encoding the various transform coefficients. Coding simulations for two images at average rates of 0.5-1 bit/pixel demonstrate a 1-3 dB improvement in signal-to-noise ratio for the vector quantization approach in the hybrid coding, with more modest improvements in signal-to-noise ratio in the transform coding. However, this improvement is quite noticeable in image quality, particularly in reducing "blockiness" in the low bit rate encoded images.