The original JPEG compression standard is efficient at low to medium levels of compression with relatively low levels of loss in visual image quality and has found widespread use in the imaging industry. Excessive compression using JPEG however, results in well-known artifacts such as "blocking" and "ringing," and the variation in image quality as a result of differing scene content is well documented. JPEG 2000 has been developed to improve on JPEG in terms of functionality and image quality at lower bit rates. One of the more fundamental changes is the use of a discrete wavelet transform instead of a discrete cosine transform, which provides several advantages both in terms of the way in which the image is encoded and overall image quality. This study involves a comparison of subjective image quality between JPEG and JPEG 2000 to establish whether JPEG 2000 does indeed demonstrate significant improvements in visual quality. A particular focus of this work is the inherent scene dependency of the two algorithms and their influence on subjective image quality results. Further work on the characterization of scene content is carried out in a connected study [S. Triantaphillidou, E. Allen, and R. E. Jacobson, “Image quality comparison between JPEG and JPEG2000. II. Scene dependency, scene analysis, and classification”, J. Imaging Sci. Technol. 51, 259 (2007)]. © 2007 Society for Imaging Science and Technology.