This paper presents a novel phonocardiogram (PCG) signal compression method based on Wavelet transform. The proposed compression method uses energy based thresholding for retaining significant coefficients, uniform scalar zero zone quantizer (USZZQ) for quantizing the amplitudes of the significant coefficients and differencing coder for integer significance map (ISM). This method is tested using the PCG records taken from qdheart and eGeneralMedical databases. The performance of the compression method is assessed in terms of compression ratio (CR), percentage root mean square difference (PRD), Wavelet energy based diagnostic distortion (WEDD) measure and mean opinion score (MOS). The compression method is evaluated with PCG signals of more than 100 records with normal sounds, murmurs, stenosis, noise and other pathologies. High compression ratios with lower distortions are achieved with the proposed method.