Abstract: A variable gain analog to digital compression encoder apparatus and method is operational for `on the fly` gain adjustments without introducing significant distortion or noise in telephone conversation. An incoming analog signal is fixed gain reproduced as a first stabilized mid-operating point analog signal. A second stabilized mid-operating point analog signal is produced in inverse proportion to the first stabilized mid-operating point analog signal, in response to a signal tapped along a signal division of a difference between the first and second signals. The second signal is compression encoded at a predetermined rate to produce pulse code modulated signal samples. The tap may be varied to change the encoding gain, at any time, in accordance with operating requirements of a telephone apparatus.