The hierarchical finite-state vector quantization (HFSVQ) introduced in the paper is an improvement of the finite state vector quantization combined with hierarchical multirate image coding. Based on an understanding of the perception of human eye and the structural features of images, the HFSVQ technique employs different coding rates and different numbers of the predictive states for representative vector selection. The bit rate used to encode images is very low while the reconstructed images can still achieve a satisfactory perceptual quality.>