Block truncation coding (BTC) is a simple and fast image compression technique suitable for realtime image transmission, and it has high channel error resisting capability and good reconstructed image quality. The main shortcoming of the original BTC algorithm is the high bit rate (normally 2 bits/pixel). In order to reduce the bit rate, an efficient BTC image compression algorithm was presented in this paper. In the proposed algorithm, a simple look-up-table method is presented for coding the higher mean and the lower mean of a block without any extra distortion, and a prediction technique is introduced to reduce the number of bits used to code the bit plane with some extra distortion. The test results prove the effectiveness of the proposed algorithm.