A Novel Morpho Image Codec called L Shaped Morpho Codec (LSMC) based on Lifting Wavelet Transform (LWT) is proposed. LWT is used for decomposing Medical Image into various sub-bands. Significant pixels of sub-band is been tracked by LSMC in particular order. Morphological dilation immediately applied using L shaped structuring element if significant pixel is found. Experimental results show that the proposed LSMC outperforms standard codec's such as Set Partitioning in Hierarchical Trees (SPIHT) and Set Partitioned Embedded bloCK coder (SPECK) for Lossy and Lossless Compression for 512 x 512 & 1024 x 1024 images. The average bits per pixel (bpp) required for Lossless Compression by LSMC is less over by SPECK. © 2015 Elsevier B.V., All rights reserved.