Video imagery sent from unmanned air vehicles (UAV) over their communication link to an operator is a key to the successful use of UAVs. The limitation of the UAV on-board communication link requires computationaly simple algorithms, and high compression rates. On the other hand, high frame rate and good image quality are needed for successful operation performance for detection, recognition, designation and tracking of targets. The goal of the proposed video compression method, called WALNUT, is to develop a variable near real-time video image compression scheme for UAVs, achieve compression performance surpassing commercial technologies such as JPEG and maintain image quality sufficient to avoid operator fatigue and allow detail analysis of individual frames. WALNUT is based on vector quantization (VQ) image compression. The features of WALNUT which make it ideal for UAV communication links are : 1) high compression ration, 2) fast compression/reconstruction, 3) no dependence on interframe correlation, 4) robust under transmission errors and noise, 5) low distortion, 6) improved quality for specific image types, 7) adaptable to line scanning equipment such as ATARS. Objectives of this initiative are to provide near real-time performance, develop a functional prototype with off-the-shelf equipment, provide compression performance evaluation, explore variable (low to high) compression rates, provide an integration plan with UAV comm. link and design a flyable video image compression prototype.