Abstract: Steganography is the process of hiding one file inside another such that others can neither identify the meaning of the embedded object, nor even recognize its existence. Current trends favor using digital image files as the cover file to hide another digital file that contains the secret message or information. One of the most common methods of implementation is Least Significant Bit Insertion, in which the least significant bit of every byte is altered to form the bit-string representing the embedded file. Altering the LSB will only cause minor changes in color, and thus is usually not noticeable to the human eye. While this technique works well for 24-bit color image files, steganography has not been as successful when using an 8-bit color image file, due to limitations in color variations and the use of a colormap. This paper presents the results of research investigating the combination of image compression and steganography. The technique developed starts with a 24-bit color bitmap file, then compresses the file by organizing and optimizing an 8-bit colormap. After the process of compression, a text message is hidden in the final, compressed image. Results indicate that the final technique has potential of being useful in the steganographic world.