Thesis submitted in partial fulfilment of the requirements for the degree of Master of Technology: Electrical Engineering in the Faculty of Engineering at the Cape Peninsula University of Technology 2013 / Earth observation satellites utilise sensors or cameras to capture data or images that are relayed to the ground station(s). The ZACUBE-02 CubeSat currently in development at the French South African Institute of Technology (F’SATI) contains a high resolution 5 megapixel on-board camera. The purpose of the camera is to capture images of Earth and relay them to the ground station once communication is established. The captured images, which can amount to a large volume of data, have to be stored on-board as the CubeSat awaits the next cycle of transmission to the ground station. This mode of operation introduces a number of problems, as the CubeSat has limited storage and memory capacity and is not able to store large amounts of data. This, together with the limitation of the downlink capacity, has set the need for the design and development of an image compression system suitable for the CubeSat environment. Image compression focuses on reducing the size of images to be stored as well as reducing the size of the images to be transmitted to the ground station. The purpose of the study is to propose a compression system to be implemented on ZACUBE-02. An intensive study of current, proposed and implemented compression methods, algorithms and techniques as well as the CubeSat specification, served as input for defining the requirements for such a system. The proposed design is a combination of image segmentation, image linearization and image entropy coding (run-length coding). This combination technique is implemented in order to achieve lossless image compression. For the proposed design, a compression ratio of 10:1 was obtained without negatively affecting image quality.The on-board storage memory constraints, the power constraints and the bandwidth constraints are met with the implementation of the proposed design, resulting in the downlink transmission time being minimised. Within the study a number of objectives were met in order to design, implement and test the compression system. These included a detailed study of image compression techniques; a look into techniques for improving the compression ratio; and a study of industrial hardware components suitable for the space environment. Keywords: CubeSat, hardware, compression, satellite image compression, Gumstix Overo Water, ZACUBE-02.