International Telemetering Conference Proceedings / October 13-16, 1986 / Riviera Hotel, Las Vegas, Nevada / In most transmission channels, bandwidth is at a premium and an important attribute of any good digital signalling scheme is to optimally utilise the bandwidth for transmitting the information. The Data Compression System in this way plays a significant role in the transmission of picture data from any Remote Sensing Satellite by exploiting the statistical properties of the imagery. The data rate required for transmission to ground can be reduced by using suitable compression technique. A data compression algorithm has been developed for processing the images of Indian Remote Sensing Satellite. Sample LANDSAT imagery and also a reference photo are used for evaluating the performance of the system. The reconstructed images are obtained after compression for 1.5 bits per pixel and 2 bits per pixel as against the original of 7 bits per pixel. The technique used is uni-dimensional Hadamard Transform Technique. The Histograms are computed for various pictures which are used as samples. This paper describes the development of such a hardware and software system and also indicates how hardware can be adopted for a two dimensional Hadamard Transform Technique.