A system and method facilitating compression of bi-level images with explicit representation of ink clusters is provided. The present invention includes a cluster shape estimator that analyzes connected component information, extracts clusters and stores the cluster in a global dictionary, a page dictionary or a store of unclustered shapes. A bitmap estimation from clusters component determines dictionary positions for clusters stored in the global dictionary which are then encoded. A cluster position estimator determines page positions of clusters of the global dictionary and/or the page dictionary that are then encoded. Further, the global dictionary, the page dictionary and the store of unclustered shapes are also encoded.