A hybrid image compression method is proposed in this work based upon two compression techniques, namely Vector Quantization (VQ) and Discrete Cosine Transform (DCT). In this approach, the codebook is generated initially with the help of ten different images using VQ. The final codebook is then generated using DCT matrix and is ready to be used. Any image can be compressed using this code book. Appropriate codewords will be listed for the selected image and ultimately the compressed form of the image can be obtained. The decompression can also be done to reconstruct the original image. Proposed approach is tested on standard images and performance of the approach is compared with standard VQ method. The performance of the proposed method is better as evidenced by higher PSNR with the hybrid method as compared to VQ method.