Block truncation coding (BTC) is an efficient block coding technique suitable for real -time image compression, and it has high channel error re-sisting capability and good reconstructed image qual-ity. Abaolute moment BTC (AMBTC) is a simple and fast variant of BTC. The main shortcoming of the original AMBTC algorithm is the high bit rate (nor-mally 2bits/pixel). In order to reduce the bit rate of AMBTC, an efficient BTC image compression algo-rithm with vector quantization (VQ) is presented in this paper. The main idea of the proposed algorithm is to reduce the number of bits required to code the higher mean, the lower mean and the bit plane, which are created by AMBTC for each image block. On the one hand, a simple look-up-table method is presented for coding the higher mean and the lower mean of a block. On the other hand, vector quantization tech-nique is introduced to reduce the number of bits used to code the bit plane. Test results prove the effective-ness of the proposed algorithm.