An encoder encodes an image portion by recursively partitioning the portion into a partitioning hierarchy of levels. The top level has a single block representing the entire portion and each lower level has four smaller blocks representing a corresponding larger block at a higher level. A palette table is generated for each bottom-level block based on the pixels of the associated block. For each successively higher level, the encoder generates a palette table for each current-level block by selecting palette colors based on the palette colors from the four palette tables for the associated four blocks at the next-lowest level. A color index map is then generated based on a final palette table selected from the palette tables generated for the partitioning hierarchy. A representation of the portion is then encoded using the final palette table and the color index map to generate a corresponding segment of an encoded bitstream.