As an elegant generalization of wavelet transform, wavelet packet (WP) provides an effective representation tool for adaptive waveform analysis. Recent work shows that image-coding methods based on WP decomposition can achieve significant gain over those based on a usual wavelet transform. However, most of the work adopts a tree-structured quantization scheme, which is a successful technique for wavelet image coding, but not appropriate for WP subbands. This paper presents an image-coding algorithm based on a rate-distortion optimized wavelet packet decomposition and on an intraband block-partitioning scheme. By encoding each WP subband separately with the block-partitioning algorithm and the JPEG2000 context modeling, the proposed algorithm naturally avoids the difficulty in defining parent-offspring relationships for the WP coefficients, which has to be faced when adopting the tree-structured quantization scheme. The experimental results show that the proposed algorithm significantly outperforms SPIHT and JPEG2000 schemes and also surpasses state-of-the-art WP image coding algorithms, in terms of both PSNR and visual quality. basis selection, bitplane coding, context modeling, set partition, wavelet packet (WP)