Image processing is carried out by transforming image data to image data having spatial frequency components, by judging whether the absolute values of the coefficients of the predetermined frequency components of the transformed image data are equal to or more than a predetermined value, by modifying the coefficients of the AC components of the image data depending on the result of the judgment, by inversely transforming the image data having the modified coefficients to image data having spatial coordinate components, by comparing the gray levels of the inversely transformed image data with predetermined values, and by transforming the gray levels to quantized levels corresponding to the result of the comparison. By carrying out proper image processing corresponding to the characteristics of the image, the number of gray levels of the image can be decreased while the characteristic portions of the original image are maintained properly.