An adaptive DCT-based image compression algorithm for radar images is proposed, tested and compared to JPEG and to classical coding algorithms for remote sensing imagery. The Modified Adaptive Discrete Cosine Transform (MADCT) scheme is proposed, which allows one to classify each image block by means of a threshold criterion based on AC and DC activity. The strategy of transmission of the DCT coefficients, the recovering process of blocks incorrectly discarded, and the bit-allocation phase have been properly designed to provide high compression of two classes of images: X-band real-aperture radar images for ship traffic control, and SAR images for browsing applications. The experimental results, in terms of PSNR and compression ratio, prove the superiority of the novel scheme with respect to standard coding techniques.