An alternative approach has been devised for encoding image data in compliance with JPEG 2000, the most recent still-image data-compression standard of the Joint Photographic Experts Group. Heretofore, JPEG 2000 encoding has been implemented by several related schemes classified as rate-based distortion-minimization encoding. In each of these schemes, the end user specifies a desired bit rate and the encoding algorithm strives to attain that rate while minimizing a mean squared error (MSE). While rate-based distortion minimization is appropriate for transmitting data over a limited-bandwidth channel, it is not the best approach for applications in which the perceptual quality of reconstructed images is a major consideration. A better approach for such applications is the present alternative one, denoted perceptual distortion control, in which the encoding algorithm strives to compress data to the lowest bit rate that yields at least a specified level of perceptual image quality. Some additional background information on JPEG 2000 is prerequisite to a meaningful summary of JPEG encoding with perceptual distortion control. The JPEG 2000 encoding process includes two subprocesses known as tier-1 and tier-2 coding. In order to minimize the MSE for the desired bit rate, a rate-distortion- optimization subprocess is introduced between the tier-1 and tier-2 subprocesses. In tier-1 coding, each coding block is independently bit-plane coded from the most-significant-bit (MSB) plane to the least-significant-bit (LSB) plane, using three coding passes (except for the MSB plane, which is coded using only one "clean up" coding pass). For M bit planes, this subprocess involves a total number of (3M - 2) coding passes. An embedded bit stream is then generated for each coding block. Information on the reduction in distortion and the increase in the bit rate associated with each coding pass is collected. This information is then used in a rate-control procedure to determine the contribution of each coding block to the output compressed bit stream.