In JPEG2000, embedded block coding with optimized truncation (EBCOT) requires a lot of computations. To enhance the performance of EBCOT, an efficient EBCOT algorithm is proposed. This algorithm consists of pass-prediction and pass-propagation. Pass prediction predicts the pass state in the next bit-plane. In particular, pass propagation generates the state of neighboring passes in the next bit-plane. This work also accomplishes boundary pass classification. With the propagated state, the pass state of the code-block can be classified for indicating the correct coding method. Various simulations have been conducted. The experimental results show that the proposed algorithm reduces the number of scan times by 42% to 52.7% for gray-level images and 11.8% to 34% for color images. The comparison demonstrates that the performance of our proposed method is higher than that of previous methods.