This document proposes a hybrid IBTC-DWT encoding scheme that combines the simple computation and edge preservation of interpolative block truncation coding (IBTC) with the high compression ratio of discrete wavelet transform (DWT). Simulation results showed that the proposed algorithm achieved better performance than IBTC-DCT in terms of compression ratio, bit rate, and reconstruction quality at low bit rates. The hybrid approach reduces computational complexity by applying DWT to the smaller sub-images produced by IBTC.