Abstract: A method and system for generating a compressed spectral image is provided. Spectral image data including a plurality of spectral intensity values is received. The spectral intensity values are associated with a first spatial dimension (x-dimension), a second spatial dimension (y-dimension) and a wavelength dimension (?-dimension). A window is applied to the spectral image data along the ?-dimension, to select a subset of the spectral image data corresponding to a range of wavelengths. A Fourier transform is performed on the windowed spectral image data along the ?-dimension, at locations along the x-dimension and y-dimension, to generate Fourier coefficients associated with each of the locations. The Fourier transformed data is filtered by retaining a subset of the Fourier coefficients at each of the locations. Wavelet compression is performed on the filtered data along the x-dimension and the y-dimension to generate the compressed spectral image.