Abstract: This paper describes a novel vector quantization (VQ) algorithm called partition dynamically VQ (PDVQ),capable of adjusting the size of image block automatically. By the method, before encoding,PDVQ first analyzes the correlation of the encoding image block and its neighboring blocks, then decides the encode method according to the comparison of the correlation result with the threshold value(the maximum correlation,MC) given by experiment. If the correlation result is less than MC, an image block size of 8×8 will be encoded, otherwise, an image block size of 4×4 will be encoded. Test result shows that PDVQ can improve the compression rate and coding speed in contrast with the normal VQ, and more importantly, it will not effect the quality of the image reconstructed.