Abstract: A system for compressing an ASCII or similarly encoded text file creates an alphabetically ordered main dictionary listing all unique words appearing in the text file. A text file "word" is defined as a sequence of characters ending with one or more "word terminators" such as spaces, commas, periods and carriage returns. The compression system also creates a common word dictionary referencing words most often encountered in the text file. The sequence of words forming the text file is represented by a word index, a list of one byte and two byte references to common and main dictionary words, respectively. The system compresses the main dictionary using three complementary techniques. First, leading characters of each dictionary word matching leading characters of a next preceding dictionary word are represented by data indicating the number of matching characters. Second, commonly encountered dictionary word suffixes are represented by data referencing entries of a small suffix dictionary.