The image system design for sounding rockets faced many difficulties, such as the limited telemetry bandwidth, multiple camera channels and a limited size, therefore an appropriate image capture and compression system based on ADV212 was proposed. The images were compressed as JPEG2000 standard which support both lossless and high ratio compression, so acceptable quality images can be transmitted through the limited-bandwidth telemetry channel. An effective channel switching and interrupt processing method suitable for on-board design was proposed. The image data was transmitted by assembly line based on pingpong operation and sent to the telemetry module on sounding rocket via two real-time channels and one buffering channel. The images compression scheme, which support both dynamic frame frequency and dynamic compression ratio, was proposed to deal with the limited telemetry bandwidth. The whole system was controlled by a Virtex-4 FPGA(field programmable gate array), and images were decoded by ADV7182 and compressed by ADV212. The realtime data transfer was approached by SRAM(static random access memory), while the buffering data transfer was approached by SDRAM(synchronous dynamic random access memory). The suitable choices of compression filter and wavelet transformation level for CCD(change-coupled device) images were analyzed through experiments by comparing PSNR(peak signal to noise ratio) between images. This image compression system fully satisfies the image monitor mission of space environment vertical exploration sounding rocket.