A method of reversible data compression is disclosed. The method is an improvement on the Lempel-Ziv data compression method that does not require a prefix for every noncompressed data unit in the encoded data stream. A code is inserted at the beginning of each string of consecutive noncompressed data bytes to indicate that the string is of noncompressed data and the number of bytes in the string. By eliminating the requirement for a separate prefix for each noncompressed data, a higher compression ratio is achieved over conventional Lempel-Ziv encoding methods.