By investigating the limitation of existing wavelet tree based image compression methods, we propose a novel wavelet fractal image compression method in this paper. Briefly, the initial errors are appointed given the different levels of importance accorded the frequency sublevel band wavelet coefficients. Higher frequency sublevel bands would lead to larger initial errors. As a result, the sizes of sublevel blocks and super blocks would be changed according to the initial errors. The matching sizes between sublevel blocks and super blocks would be changed according to the permitted errors and compression rates. Systematic analyses are performed and the experimental results demonstrate that the proposed method provides a satisfactory performance with a clearly increasing rate of compression and speed of encoding without reducing SNR and the quality of decoded images. Simulation results show that our method is superior to the traditional wavelet tree based methods of fractal image compression.