In this paper a new method for digital image watermarking based on Zero Assigned Filter Banks and Embedded Zero Tree Wavelet (EZW) algorithm is presented. An image is partitioned into 128 × 128 subblocks and each block is processed in a three stage decomposition structure by a filter bank which is assigned a zero around the stop band. The coefficients to be marked are chosen according to the EZW algorithm. This method not only provides a robust watermarking scheme but may also be used as an effective compression strategy. The algorithm is tested under white Gaussian noise and against JPEG compression and it is observed to be robust even when exposed to high levels of corruption. © 2005 IEEE.