The warped discrete cosine transform (VMCT) has been shown to improve the compression performance compared to standard DCT for image compression at high bit rates. In the proposed approach, the WDCT parameters are embedded into the transform coefficients for low bit rates in the form of a watermark to avoid the WDCT parameter side information overhead, improving the compression performance for low bit rates. Furthermore, optimal postprocess filtering, with filter coefficients being determined at the encoder and multiplexed into the bit stream, is proposed to improve the quality of the decoded image through postprocess filtering at the decoder. It is shown that a significant gain in quality can be achieved by the postprocess filtering. As optimal postprocess filtering is utilized, the need of a deblocking filter for low bit rates is finally evaluated to improve the statistical quality and visual appearance.