In this paper we present an image coding technique which applies a lattice quantizer on the coefficient domain generated by a Gabor-like wavelet transform. The spatial correlation is reduced by this perceptual subband/wavelet transform with efficient implementation. Due to its visual significance, the DC component is PCM coded. The coefficients are then quantized by a block quantizer whose points lie on a lattice, followed by ideal entropy coding. Different truncated lattices have been tested, namely An, Dn, and E8. Simulation results using grayscale images have shown good performance for bit rates lower than 0.5 bits/pixel when the truncated lattice D16 is used.