In this paper, a complete system for image transmission in harsh underwater environment is proposed. The key to increase the performance of the system is the use of an efficient image compression algorithm with a bandwidth-efficient modulation technique. The wavelet packet (WP) decomposition is used to get the best image representation and the set partitioning in hierarchical trees is applied on the WP coefficients. The parental conflicts are resolved, the parent–child relationships are adapted and thus the similarities between cross-subbands are preserved. Reed–Solomon is used for forward error correction to combat with the errors in wireless transmission. Orthogonal frequency division multiplexing with differential quadrature phase shift keying is used to transmit the generated bit stream. Effective image quality metrics are used for objective evaluation. Results show that the proposed system manages to transmit images over the limited bandwidth, and to effectively minimize the perceptual degradation.