Large images consume more storage space needing high data rates for transmission demanding the innovation of efficient image compression systems. Owing to the massive parallel architecture and generalization ability of neural networks to memorize inputs even on untrained data, the computational simplicity of wavelets, ability of Differential Pulse Code Modulation (DPCM) to reduce the unused or redundant bits in the information, in this paper an hybrid image compression system combining the advantages of wavelets and neural networks is implemented along with Differential Pulse Code Modulation based on the predicted sample values. Scalar quantization and Huffman encoding schemes are used as well for compressing different sub bands i.e the low frequency band coefficients are compressed by the DPCM while the high frequency band coefficients are compressed using neural networks. Satisfactory reconstructed images with increased bit rates and large Peak Signal to Noise Ratio (PSNR) can be achieved with this scheme. Wavelet transform eliminates the blocking artefacts' associated with cosine transform and neural networks minimize the Mean Square Error (MSE).Empirical analysis and metrics calculation is performed for the sake of relative analysis.