An emerging trend in the banking industry is to digitize checks for storage and transmission. An immediate requirement for efficient storage and transmission is check image compression. General purpose compression algorithms such as JPEG and wavelet-based methods produce annoying ringing or blocking artifacts at high compression ratios. In this paper, a layered approach to check image compression is proposed in which a check image is represented in several layers. The first layer describes the foreground map; the second layer specifies the gray levels of foreground pixels; the third layer is a lossy representation of the background image; and the fourth layer describes the error between the original and the reconstructed image of the first three layers. The layered coding approach produces images of better quality than traditional JPEG and wavelet coding methods, especially in the foreground, i.e., the text and graphics. In addition, this approach allows progressive retrieval or transmission of different image layers.