Efficient lossless coding and transmission of large color images through bandlimited channels are of growing interest in many applications. Classically lossless coding is performed in the spatial domain by entropy coding of the decorrelated pixels. However, such coding yields only a maximum of 3:1 compression. Recent developments in integer to integer wavelet transform allow multiresolution representation and progressive transmission of images through bandlimited channels starting from the entropy coded lowest resolution image. However, such schemes are able to reduce the bit rate to a limited extent. We present here an efficient automated technique using a simple color space transformation from RGB to HSI that segments and retrieves the color object contour in a fast manner. When such a segmented image is subjected to the integer to integer wavelet transform followed by an adaptive arithmetic coding model, lossless compression up to 20:1 has been achieved for some color images. Due to the substantial decrease in size of the input image to be processed, the execution time of the entire algorithm is reduced drastically. Although the color transformation from RGB to L∗ a∗ b∗ results in better visual appearance as well as more compressibility, this nonlinear transformation is more computationally intensive. Therefore for progressive transmission a simple color transformation scheme is preferable.