The Joint Photographic Experts Group (JPEG) within the ISO international standards organization is defining a new standard for still image compression - JPEG-2000. This paper describes the Wavelet Trellis Coded Quantization (WTCQ) algorithm submitted by SAIC and The University of Arizona to the JPEG-2000 standardization activity. WTCQ is the basis of the current Verification Model (VM) being used by JPEG participants to conduct algorithm experiments. The outcomes from these experiments will lead to the ultimate specification of the JPEG-2000 algorithm. Prior to describing WTCQ and its subsequent evolution into the initial JPEG-2000 VM, a brief overview of the objectives of JPEG-2000 and the process by which it is being developed is presented.