In this paper, a new variant of trellis-coded modulation with Ungerboeck-Gray mapping 'TCM-UGM' is presented for spectral efficiency of 2 bit/s/Hz. The performance of this encoding scheme is investigated over Rayleigh fading channel. The simulation result, using 16-state TCM-UGM encoder, shows clearly that the proposed scheme outperforms the performance of the 32-state TCM by 2.8 dB at BER=10-5. Both compression and transmission errors may degrade the quality of images. To illustrate the effectiveness of the proposed system for transmission the compressed image with the CDF9/7 wavelet and SPIHT coding, a comparison between the TCM and the new variant the TCM-UGM is presented. Simulation results on several types of compressed image were presented. For this study, four Image Quality Metrics (IQMs) were employed in the image quality assessment after the transmission. Results show that the new variant of TCM-UGM reduces transmission errors and better protects the compressed image during transmission.