Modernization and Globalization have made the multimedia technology as one of the fastest growing field in recent times but optimal use of bandwidth and storage has been one of the topics which attract the research community to work on. Considering that images have a lion?s share in multimedia communication, efficient image compression technique has become the basic need for optimal use of bandwidth and space. This paper proposes a novel method for image compression based on fusion of moving average histogram and RBF (Radial Basis Function). Proposed technique employs the concept of reducing color intensity levels using moving average histogram technique followed by the correction of color intensity levels using RBF networks at reconstruction phase. Existing methods have used low resolution images for the testing purpose but the proposed method has been tested on various image resolutions to have a clear assessment of the said technique. The proposed method have been tested on 35 images with varying resolution and have been compared with the existing algorithms in terms of CR (Compression Ratio), MSE (Mean Square Error), PSNR (Peak Signal to Noise Ratio), computational complexity. The outcome shows that the proposed methodology is a better trade off technique in terms of compression ratio, PSNR which determines the quality of the image and computational complexity