Abstract: An encode/decode compression system applied in magnetic flux leakage testing(MFLT) was presented. This system combined integer wavelet transform, improved SPIHT(Set Partitioning in Hierarchical Trees) algorithm and adaptive arithmetic coding scheme. The algorithm could be implemented without floating computing and had excellent features of low complexity and high efficiency. Combined with adaptive arithmetic coding scheme, SPIHT algorithm modified for the one-dimensional case could compress signals with the property of high compression ratio and progressive encoding. MFL signals treated with the low-pass filter were used to test the system. Experimental results showed that this method was effective in high compression ratio and signal fidelity. So the system was useful for on-line MFL testing.