The method of improving the PSNR in fractal compression is studied.Based on the magnification effect of fractal code for image

the algorithm extracts the high frequency information in the zooming out image by wavelet transform

then merges the information into the decoded image by wavelet transform. A modification method of Lipschitz exponent of wavelet coefficients local module maximum is also investigated in order to get rid of the blocking effect in the result image. This kind of method is used to improve the PSNR of result image in low bits rate image compression.