High-resolution digital images make up very large data sets that are relatively slow to transmit and expensive to store. Data compression techniques are being developed to address this problem, but significant image deterioration can occur at high compression ratios. In this study, the authors evaluated a form of adaptive block cosine transform coding, a new compression technique that allows considerable compression of digital radiographs with minimal degradation of image quality. To determine the effect of data compression on diagnostic accuracy, observer tests were performed with 60 digitized chest radiographs (2,048 x 2,048 matrix, 1,024 shades of gray) containing subtle examples of pneumothorax, interstitial infiltrate, nodules, and bone lesions. Radiographs with no compression, with 25:1 compression, and with 50:1 compression ratios were presented in randomized order to 12 radiologists. The results suggest that, with this compression scheme, compression ratios as high as 25:1 may be acceptable for primary diagnosis in chest radiology.