In some important image coding techniques, such as transform coding, an image is first divided into subimages, and then each subimage is coded independently. The segmentation procedure has significant advantages, but when used in a low bit rate scheme, an undesirable side effect can occur. Specifically, when the image is reconstructed at the decoder, a "blocking effect" can develop due to discontinuities between the subimages. Two methods are developed to reduce the blocking effect. The performance of these methods when applied to a discrete cosine transform image coder is discussed.