A novel processing scheme for gray level image compression based on the human visual system (HVS) and fuzzy control is proposed. The spatial model of the threshold vision that incorporates the masking processes takes account of two major sensitivities of the human visual system, namely background illumination levels and spatial frequency sensitivities. The distortion measures use common sense fuzzy rules for image quality prediction. The human visual models have been successfully applied in image compression. By the addition of the visual model, performance of these systems have a visible improvement of subject quality depending on visual perception. The processed image performs both improved compression ratio as well as improved SNR (signal to noise ratio) in compression to the standardized still image compression technique, i.e., the JPEG.