This document describes a new lossless color image compression algorithm based on hierarchical prediction and context-adaptive arithmetic coding. It decorrelates RGB images using a reversible color transform, then encodes the Y component conventionally and the chrominance components hierarchically using upper, left, and lower pixels for prediction rather than just upper and left. An appropriate context model is defined for prediction errors, which are arithmetic coded. Testing showed this method achieves better bit rate compression than JPEG2000 and JPEG-XR.