This paper introduces the concept of all phase cosine bi-orthogonal transform (APCBOT) and an image compression algorithm based on APCBOT. The proposed APCBOT is derived from convolution algorithm of Discrete Cosine Sequence Filter (DCSF), which is simpler than conventional DCT and free of waveform distortion. In the proposed image-compression scheme, as an alternative of the DCT in conventional JPEG, APCBOT can appropriately attenuate the high frequency components while transforming the original images from time domain into frequency domain, as a result the quantization steps can be very simple. The experimental results show that the APCBOT based compression is superior to DCT based compression in the following aspects：simpler quantization, higher compassion rate and reconstruction image with better quality.