Color images may be encoded by using a gray-scale image compression technique on each of the three color planes. Such an approach, however, does not take advantage of the correlation existing between the color planes. In this paper, a new segmentation-based lossless compression method is proposed for color images. The method exploits the correlation existing among the three color planes by treating each pixel as a vector of three components, performing region growing and difference operations using the vectors, and applying a color coordinate transformation. The method performed better than the Joint Photographic Experts Group (JPEG) standard by an average of 3.40 bits/pixel with a database including four natural color images of scenery, four images of burn wounds, and four fractal images, and it outperformed the Joint Bi-Level Image experts Group (JBIG) standard by an average of 3.01 bits/pixel. When applied to a database of 20 burn wound images, the 24 bits/pixel images were efficiently compressed to 4.79 bits/pixel, then requiring 4.16 bits/pixel less than JPEG and 5.41 bits/pixel less than JBIG.