According to the characteristic of hyper-spectrum image and the requirement of realization with hardware, a novel compression scheme based on in-frame decorrelation is presented for hyper-spectrum image. The compression scheme includes two aspects: image matching and in-frame decorrelation, the residual image is compressed based on wavelet transform with bit-plane and adaptive arithmetic coding. The output bit-stream is generated according to the rate-distortion criterion and the experimental result is very satisfactory for hyper-spectrum image compression. The image compression algorithm based on bit-plane and arithmetic coding can also be used to other cases, it′s faster than SPIHT and easy to realize with hardware.