In this research, we perform a multiresolution analysis of the mappings used in fractal image compression. We derive the transform-domain structure of the mappings and demonstrate a close connection between fractal image compression and wavelet transform coding using the Haar basis. We show that under certain conditions, the mappings correspond to a hierarchy of affine mappings between the subbands of the transformed image. Our analysis provides new insights into the mechanism underlying fractal image compression, leads to a new non-iterative transform-domain decoding algorithm, and suggests a new transform-domain encoding method with extensions to wavelets other than the Haar transform.