ITC/USA 2009 Conference Proceedings / The Forty-Fifth Annual International Telemetering Conference and Technical Exhibition / October 26-29, 2009 / Riviera Hotel & Convention Center, Las Vegas, Nevada / This paper describes a psychophysical experiment to measure visibility thresholds (VT) for quantization distortion in JPEG2000 and an associated quantization algorithm for visually lossless coding of color aerial images. The visibility thresholds are obtained from a quantization distortion model based on the statistical characteristics of wavelet coefficients and the deadzone quantizer of JPEG2000, and the resulting visibility thresholds are presented for the luminance component (Y) and two chrominance components (Cb and Cr). Using the thresholds, we have achieved visually lossless coding for 24-bit color aerial images at an average bitrate of 4.17 bits/pixels, which is approximately 30% of the bitrate required for numerically lossless coding.