A codebook generating method comprises a dividing and transforming step dividing an original image into original blocks and transforming each of the original blocks into an original vector; a parameter setting step setting a distortion tolerance and a predetermined number of representative blocks; a single group setting step setting the original vectors as a group; a preliminary grouping step grouping all the original vectors in a group currently having largest distortion into two groups using a grouping algorithm, wherein the preliminary grouping step is repeated until the number of groups is equal to the predetermined number of representative blocks; and a grouping step grouping all the original vectors based on a plurality of initial centroids to obtain final centroids, and storing vectors corresponding to the final centroids in a codebook, wherein the centroids of the groups are treated as the initial centroids.