Image compression reduces the amount of space necessary to store digital images and allows quick transmission of images to other hospitals, departments, or clinics. However, the degradation of image quality due to compression may not be acceptable to radiologists or it may affect diagnostic results. A preliminary study with small-scale test procedures was conducted using several chest images with common lung diseases and compressed with JPEG and wavelet techniques at various ratios. Twelve board-certified radiologists were recruited to perform two types of experiments. In the first part of the experiment, presence of lung disease on six images was rated by radiologists. Images presented were either uncompressed or compressed at 32:1 or 48:1 compression ratios. In the second part of the experiment, radiologists were asked to make subjective ratings by comparing the image quality of the uncompressed version of an image with the compressed version of the same image, and then judging the acceptability of the compressed image for diagnosis. The second part examined a finer range of compression ratios (8:1, 16:1, 24:1, 32:1, 44:1, and 48:1). In all cases, radiologists were able to make an accurate diagnosis on the given images with little difficulty, but image degradation perceptibility increased as the compression ratio increased. At higher compression ratios, JPEG images were judged to be less acceptable than wavelet-based images, however, radiologists believed that all the images were still acceptable for diagnosis. Results of this study will be used for later comparison with large-scale studies.