A two-stage method for compressing bilevel images is described that is particularly effective for images containing repeated subimages, notably text. In the first stage, connected groups of pixels, corresponding approximately to individual characters, are extracted from the image. These are matched against an adaptively constructed library of patterns seen so far, and the resulting sequence of symbol identification numbers is coded and transmitted. From this information, along with the library itself and the offset from one mark to the next, an approximate image can be reconstructed. The result is a lossy method of compression that outperforms other schemes. The second stage employs the reconstructed image as an aid for encoding the original image using a statistical context-based compression technique. This yields a total bandwidth for exact transmission appreciably undercutting that required by other lossless binary image compression methods. Taken together, the lossy, and lossless methods provide an effective two-stage progressive transmission capability for textual images which has application for legal, medical, and historical purposes, and to archiving in general.>