Techniques are provided for compressing and decompressing image data which may reduce the distortion that may otherwise be created by the compression of data values representative of null posts, overlays or other features that differ from the underlying image. In compression, at least one coefficient generated by a forward wavelet transform may be replaced with respective replacement coefficients. The transformed image data is then subjected to an inverse wavelet transform to generate modified image data in which the data values which differ from the underlying image have been replaced by interpolated or extrapolated values. The modified image data may be compressed in accordance with wavelet-based image compression. Alternatively, wavelet image compression may be applied directly to the coefficients resulting from the modified forward wavelet transform. In decompression, the compressed image data may be decompressed and data values representative of null posts or other features may be replaced with their original values.