A system for compressing a first file based on a second file used as a dictionary. The second file is sampled at predetermined locations within the second file, each sample having a fixed sample length. A dictionary database is created by storing each sample and a start position within the second file of the corresponding sample. The first file is compared to the dictionary database to locate any matches that exist between the first file and the stored samples of the dictionary database. In turn, the first file is encoded by outputting coded segments for each match located by this comparison of the source file and the dictionary database and uncoded segments for all remaining portions of the first file.