Image compression, in the present context of heavy network traffic, is going through major5 research and development. The lossless compression techniques, presently in practise, follow three basicparadigms – character repetition removal, frequency measurement-encoding and dictionary maintenance. In the proposed method, the character repetition removal and dictionary maintenance concepts were incorporated together. The output encoded file had yielded comparably better results than standard lossless image compression techniques. The proposed method had been tested on a series of continuous and discreet tone standard test images.