Abstract— To provide near-lossless compression for both color and grayscale images, this study offers RIFD-LZW, a novel hybrid image compression algorithm that combines the Rounding the Intensity and Dividing (RIFD) technique with Lempel-Ziv-Welch (LZW) encoding. The methodology achieves a higher compression ratio than either technique alone as it uses RIFD to reduce image redundancy and LZW to efficiently encode data. When applied to the Kodak dataset, experimental results show that RIFD-LZW decreases file size by 73.03% and improves compression ratio by 9.7% when compared to RIFD-Huffman. Additionally, it attains a compression ratio for grayscale images that is 29.6% greater. With average Mean Squared Error (MSE) values of 2.88, 2.93, and 2.78 for the EPFL, Kodak, and Waterloo datasets, respectively, the proposed algorithm keeps up its outstanding visual quality. The tiny distortion that is introduced matches the MSE of RIFD and is undetectable to the human visual system. These results validate that RIFD-LZW is a strong contender for both lossy and near-lossless compression applications since it offers effective image compression with good image fidelity preservation.