An exemplar dictionary is built from example image blocks for determining predictor blocks for encoding and decoding images. The exemplar dictionary comprises a hierarchical organization of example image blocks. The hierarchical organization of image blocks is obtained by clustering a set of example image blocks, for example, based on k-means clustering. Performance of clustering is improved by transforming feature vectors representing the image blocks to fewer dimensions. Principal component analysis is used for determining feature vectors with fewer dimensions. The clustering performed at higher levels of the hierarchy uses fewer dimensions of feature vectors compared to lower levels of hierarchy. Performance of clustering is improved by processing only a sample of the image blocks of a cluster. The clustering performed at higher levels of the hierarchy uses lower sampling rates as compared to lower levels of hierarchy.