Hyperspectral images provide richer and finer spectral information than traditional multispectral images, however the volume of generated data is dramatically increased. Data compression will be essential for economical distribution when spaceborn hyperspectral data are regularly available. Contemporary techniques of image compression are mainly designed to explore the redundant information in the 2-D image space. It is awkward when they are applied to hyperspectral data. In this study, a 3-D wavelet transform is proposed to explore useful information in the spatial and spectral dimension simultaneously. The procedure proposed for hyperspectral image compression is mainly divided into three steps: 3-D wavelet transform, optimal quantization and Huffman coding. Various combinations of wavelet functions, decomposition levels and quantization intervals were experimented with an AVIRIS image. The decompressed images are evaluated objectively and subjectively, based on signal-to-noise ratio (SNR) and classification accuracy measures, respectively. The results indicate that 3-D wavelet transform is efficient for hyperspectral image compression and preserves the capability of the classification applications.