Abstract: In order to resolve the contradiction between the need of high image quality and low data rates in data transmission and storage in the fields of satellite remote sensing, a new compression algorithm of combining spatial quarter-tree data architecture with multi-mode adaptive quantization technique is proposed. The algorithm is characterized with higher PSNR of the reconstructed image and lower computation complexity than JPEG, and the image detail preserving capability of the algorithm is better than that of JPEG. The ASIC realizing the algorithm is designed and manufactured using Field Programmable Gate Arrays. The peak processing speed of the ASIC can reach 288Mbit/s and its power consumption is lower than 1W.