A novel variable-rate image-coding scheme called the predictive subcodebook search algorithm (PSS) is proposed. In PSS, the initial searched codeword for each input vector is predicted by its encoded neighbors and the closest codeword in the codebook is searched from a specific range (or subcodebook) that is determined dynamically according to the block type of its encoded neighbors. In addition, the relative addressing technique is employed to encode the searched closest codeword. According to the simulation results, it is shown that PSS not only provides better objective image quality peak SNR (PSNR) but also reduces the storage cost for storing multiple codebooks. Furthermore, PSS requires very little computational cost, compared to the full search algorithm for the vector quantization (VQ) scheme. Therefore, it is concluded that PSS indeed provides a good means for variable-rate image coding.