A level-embedded lossless image compression method for continuous-tone still images is presented. Level (bit-plane) scalability is achieved by separating the image into two layers (the base layer and the residual layer) before compression. Excellent compression performance is obtained by exploiting both spatial and interlevel correlations. A comparison of the proposed scheme with a number of scalable and non-scalable lossless image compression algorithms indicates that the level-embedded compression incurs only a small penalty in compression efficiency over non-scalable lossless compression, while offering the significant benefit of level-scalability.