Digital image watermarking is process of adding some information in image in form of text, image and logo for the purpose of owner identification and security. This information may be in visible or in invisible form. So that anyone can be extracted that info when required for a particular purposes. The main obstacle in extraction process of watermark information is the different-2 attacks perform of watermarked image. These attacks degrade the watermark information embedded in watermarked image. Sometimes they affected so much as the watermark information will be destroyed. Digital image in their raw form require a more amount of storage capacity. Considering the important role played by digital imaging and video, it is necessary to develop a system that produces high degree of compression while preserving critical image information. There is various transformation techniques used for data compression. Discrete Cosine Transform (DCT) and Discrete Wavelet Transform (DWT) are the most commonly used transformation. DCT has high energy compaction property and requires less computational resources. On the other hand, DWT is multi resolution transformation. In this work, we propose a hybrid DWT-DCT algorithm for image compression and reconstruction taking benefit from the advantages of both algorithms. The algorithm performs the Discrete Cosine Transform (DCT) on the Discrete Wavelet Transform (DWT) coefficients. Simulations have been conducted on several natural, benchmarks, medical and endoscopic images. The simulation results show that the proposed hybrid DWT-DCT algorithm performs much better than the standalone JPEG-based DCT, DWT, and WHT algorithms in terms of Peak Signal to Noise Ratio (PSNR). The new scheme reduces false contouring and blocking artifacts significantly. The rate distortion analysis shows that for a fixed level of distortion, the number of bits required to transmit the hybrid coefficients would be less than those required for other schemes Furthermore, the proposed algorithm is also compared with the some existing hybrid algorithms. The comparison results show that, the proposed hybrid algorithm has better performance and reconstruction quality.