A system is presented for compression of hyperspectral imagery. Specifically, DPCM is used for spectral decorrelation, while a 2-D discrete wavelet coding scheme is used for spatial decorrelation. Trellis coded quantization is used to encode the wavelet coefficients. Side information and rate allocation strategies are discussed. Entropy-constrained codebooks are designed using a modified version of the generalized Lloyd algorithm. This entropy constrained system achieves a compression ratio of greater than 70:1 with an average PSNR of the coded hyperspectral sequence approaching 41 dB.