This paper deals with BDH technique, which is used to the compression of digital images. In BDH technique, Huffman coding[6] and Difference coding[7] with Binary Plane Technique[1] are combined. The BDH technique is compared with Binary Plane Technique and JPEG[4]. Experimental results show that BDH improves compression rate compared to Binary Plane Technique[1]. The same algorithm can be extended to color images.