To reduce frame memory usage in LCD overdrive, block truncation coding (BTC) is commonly used due to its efficient coding and low implementation cost. However, the inherent limitation of BTC causes severe perceptual artifacts and degrades overdrive performance. To solve this problem, we propose an adaptive multi-level BTC (AM-BTC) in this paper. The AM-BTC firstly overcomes the limitation by adaptively selecting 2-level or 4-level BTC according to the edge property of the coding block. Then, to reduce the bit rate of AM-BTC we improve the 2-level and 4- level BTCs by using only luminance bit-map to represent three color bit-maps. As shown in simulation results, the AM-BTC successfully reduces the frame memory usage to 1/6 and significantly improves coding performance (up to 3.779 dB) as compared with other algorithms. When the AM-BTC is applied to LCD overdrive, it also improves overdrive performance up to 3.390 dB as compared with other competitive methods in literature.