A new hybrid coding scheme called the finite state residual vector quantization (FSRVQ) proposed combines the advantages of both the finite state VQ and the mean/residual VQ. The codewords in FSRVQ were designed by removing the block means to reduce the codebook size. The block means were predicted by the neighboring blocks to reduce the bit rate. In addition, the predicted means were added to the residual vectors so that the state codebooks could be generated entirely. The performance of FSRVQ was indicated from experimental results to be better than both ordinary FSVQ and MRVQ.