It is well-known that one of the best wavelet-based image compression techniques, called Wavelet Difference Reduction-WDR, has both simple algorithm and comparative rate-distortion results comparing to other coders in the literature. In this paper, we propose an algorithm to enhance the performance of WDR coder in a very efficient way. The methodology is highly based on the context adaptive model. High-order statistical context modeling is used for significant coefficients prediction by scanning order adaptation of WDR. In binary mode, the coder is clearly better than Set Partitioning in Hierarchical Trees (SPIHT). A new conditional Arithmetic Coding (AC) using array of contexts is specifically designed for WDR-based coder. Based on our simulation results of all images in the test set which covers various types of images, it is apparent that our proposed coder in AC mode generates the rate-distortion results that are superior to those of all other WDR-based coders in the literature. Furthermore, it is very competitive to SPIHT-AC and JPEG2000, the best coders, at all bit rates.