|Abstract: Watermarking is highly demanding in recent times for the protection of multimedia data in network environment from illegal use of data and from the transmission losses due to the fading. To this aim, this dissertation proposes a protection mechanism for discrete transform based compressed image through error concealment (EC) without affecting the compatibility of standard JPEG coding. In this process a low resolution image (Image-digest) is embedded in to host image during encoding using Quantization index modulation. Digest image is obtained from the host image by using half-toning technique. At the receiving side at the decoder, these embedded images are extracted and keep it as a reference to conceal the transmission losses in the received image. Result shows the significant performance improvement in visual quality tested using WiMAX and has been compared with the few other existing methods.