We propose an efficient classified vector quantizer (CVQ) technique employing the linear phase paraunitary (LPPU) M-band filter bank. Based on the asymptotic distortion of VQ, a coding gain, which includes the gain by the correlation in the vector as well as the energy compaction, is first derived. Then we design the LPPU four-band and eight-band filter banks, with various lengths, that maximize the coding gain. Among the designed LPPU filter banks, we select the LPPU fourband filter bank for the proposed CVQ technique, since we can significantly alleviate the complexity of CVQ and classify the input image more accurately with 4 X 4 blocks than with 838 blocks. However, the side information for the 4 X 4 blocks is four times that for the 8 X 8 blocks. In order to reduce the side information, we propose the quadtree method, which reduces the side information by about 50%. Simulation results demonstrate that the proposed technique yields about 0.8- to 1.0-dB peak-SNR gain over that of the Joint Photographic Experts Group in the range of 0.3 to 0.4 bits per pixel.