Abstract: The invention provides a perceptual audio signal compression system and method. One aspect of the invention described herein includes transforming the signal into a plurality of bi-orthogonal modified discrete cosine transform (BMDCT) frequency coefficients using a bi-orthogonal modified discrete cosine transform; quantizing the BMDCT frequency coefficients to produce a set of integer numbers which represent the BMDCT frequency coefficients; and encoding the set of integer numbers to lower the number of bits required to represent the BMDCT frequency coefficients.