diff --git a/src/main/java/com/thealgorithms/compression/ArithmeticCoding.java b/src/main/java/com/thealgorithms/compression/ArithmeticCoding.java
new file mode 100644
index 000000000000..b5ccf359d1be
--- /dev/null
+++ b/src/main/java/com/thealgorithms/compression/ArithmeticCoding.java
@@ -0,0 +1,157 @@
+package com.thealgorithms.compression;
+
+import java.math.BigDecimal;
+import java.math.MathContext;
+import java.util.ArrayList;
+import java.util.Collections;
+import java.util.HashMap;
+import java.util.List;
+import java.util.Map;
+
+/**
+ * An implementation of the Arithmetic Coding algorithm.
+ *
+ * <p>
+ * Arithmetic coding is a form of entropy encoding used in lossless data
+ * compression. It encodes an entire message into a single number, a fraction n
+ * where (0.0 <= n < 1.0). Unlike Huffman coding, which assigns a specific
+ * bit sequence to each symbol, arithmetic coding represents the message as a
+ * sub-interval of the [0, 1) interval.
+ * </p>
+ *
+ * <p>
+ * This implementation uses BigDecimal for precision to handle the shrinking
+ * intervals, making it suitable for educational purposes to demonstrate the
+ * core logic.
+ * </p>
+ *
+ * <p>
+ * Time Complexity: O(n*m) for compression and decompression where n is the
+ * length of the input and m is the number of unique symbols, due to the need
+ * to calculate symbol probabilities.
+ * </p>
+ *
+ * <p>
+ * References:
+ * <ul>
+ * <li><a href="https://en.wikipedia.org/wiki/Arithmetic_coding">Wikipedia:
+ * Arithmetic coding</a></li>
+ * </ul>
+ * </p>
+ */
+public final class ArithmeticCoding {
+
+    private ArithmeticCoding() {
+    }
+
+    /**
+     * Compresses a string using the Arithmetic Coding algorithm.
+     *
+     * @param uncompressed The string to be compressed.
+     * @return The compressed representation as a BigDecimal number.
+     * @throws IllegalArgumentException if the input string is null or empty.
+     */
+    public static BigDecimal compress(String uncompressed) {
+        if (uncompressed == null || uncompressed.isEmpty()) {
+            throw new IllegalArgumentException("Input string cannot be null or empty.");
+        }
+
+        Map<Character, Symbol> probabilityTable = calculateProbabilities(uncompressed);
+
+        BigDecimal low = BigDecimal.ZERO;
+        BigDecimal high = BigDecimal.ONE;
+
+        for (char symbol : uncompressed.toCharArray()) {
+            BigDecimal range = high.subtract(low);
+            Symbol sym = probabilityTable.get(symbol);
+
+            high = low.add(range.multiply(sym.high()));
+            low = low.add(range.multiply(sym.low()));
+        }
+
+        return low; // Return the lower bound of the final interval
+    }
+
+    /**
+     * Decompresses a BigDecimal number back into the original string.
+     *
+     * @param compressed       The compressed BigDecimal number.
+     * @param length           The length of the original uncompressed string.
+     * @param probabilityTable The probability table used during compression.
+     * @return The original, uncompressed string.
+     */
+    public static String decompress(BigDecimal compressed, int length, Map<Character, Symbol> probabilityTable) {
+        StringBuilder decompressed = new StringBuilder();
+
+        // Create a sorted list of symbols for deterministic decompression, matching the
+        // order used in calculateProbabilities
+        List<Map.Entry<Character, Symbol>> sortedSymbols = new ArrayList<>(probabilityTable.entrySet());
+        sortedSymbols.sort(Map.Entry.comparingByKey());
+
+        BigDecimal low = BigDecimal.ZERO;
+        BigDecimal high = BigDecimal.ONE;
+
+        for (int i = 0; i < length; i++) {
+            BigDecimal range = high.subtract(low);
+
+            // Find which symbol the compressed value falls into
+            for (Map.Entry<Character, Symbol> entry : sortedSymbols) {
+                Symbol sym = entry.getValue();
+
+                // Calculate the actual range for this symbol in the current interval
+                BigDecimal symLow = low.add(range.multiply(sym.low()));
+                BigDecimal symHigh = low.add(range.multiply(sym.high()));
+
+                // Check if the compressed value falls within this symbol's range
+                if (compressed.compareTo(symLow) >= 0 && compressed.compareTo(symHigh) < 0) {
+                    decompressed.append(entry.getKey());
+
+                    // Update the interval for the next iteration
+                    low = symLow;
+                    high = symHigh;
+                    break;
+                }
+            }
+        }
+
+        return decompressed.toString();
+    }
+
+    /**
+     * Calculates the frequency and probability range for each character in the
+     * input string in a deterministic order.
+     *
+     * @param text The input string.
+     * @return A map from each character to a Symbol object containing its
+     * probability range.
+     */
+    public static Map<Character, Symbol> calculateProbabilities(String text) {
+        Map<Character, Integer> frequencies = new HashMap<>();
+        for (char c : text.toCharArray()) {
+            frequencies.put(c, frequencies.getOrDefault(c, 0) + 1);
+        }
+
+        // Sort the characters to ensure a deterministic order for the probability table
+        List<Character> sortedKeys = new ArrayList<>(frequencies.keySet());
+        Collections.sort(sortedKeys);
+
+        Map<Character, Symbol> probabilityTable = new HashMap<>();
+        BigDecimal currentLow = BigDecimal.ZERO;
+        int total = text.length();
+
+        for (char symbol : sortedKeys) {
+            BigDecimal probability = BigDecimal.valueOf(frequencies.get(symbol)).divide(BigDecimal.valueOf(total), MathContext.DECIMAL128);
+            BigDecimal high = currentLow.add(probability);
+            probabilityTable.put(symbol, new Symbol(currentLow, high));
+            currentLow = high;
+        }
+
+        return probabilityTable;
+    }
+
+    /**
+     * Helper class to store the probability range [low, high) for a symbol.
+     */
+    public record Symbol(BigDecimal low, BigDecimal high) {
+    }
+}
diff --git a/src/main/java/com/thealgorithms/compression/LZW.java b/src/main/java/com/thealgorithms/compression/LZW.java
new file mode 100644
index 000000000000..c8383815ad4f
--- /dev/null
+++ b/src/main/java/com/thealgorithms/compression/LZW.java
@@ -0,0 +1,136 @@
+package com.thealgorithms.compression;
+
+import java.util.ArrayList;
+import java.util.HashMap;
+import java.util.List;
+import java.util.Map;
+
+/**
+ * An implementation of the Lempel-Ziv-Welch (LZW) algorithm.
+ *
+ * <p>
+ * LZW is a universal lossless data compression algorithm created by Abraham
+ * Lempel, Jacob Ziv, and Terry Welch. It works by building a dictionary of
+ * strings encountered during compression and replacing occurrences of those
+ * strings with a shorter code.
+ * </p>
+ *
+ * <p>
+ * This implementation handles standard ASCII characters and provides methods for
+ * both compression and decompression.
+ * <ul>
+ * <li>Compressing "TOBEORNOTTOBEORTOBEORNOT" results in a list of integer
+ * codes.</li>
+ * <li>Decompressing that list of codes results back in the original
+ * string.</li>
+ * </ul>
+ * </p>
+ *
+ * <p>
+ * Time Complexity: O(n) for both compression and decompression, where n is the
+ * length of the input string.
+ * </p>
+ *
+ * <p>
+ * References:
+ * <ul>
+ * <li><a href="https://en.wikipedia.org/wiki/Lempel%E2%80%93Ziv%E2%80%93Welch">Wikipedia:
+ * Lempel–Ziv–Welch</a></li>
+ * </ul>
+ * </p>
+ */
+public final class LZW {
+
+    /**
+     * Private constructor to prevent instantiation of this utility class.
+     */
+    private LZW() {
+    }
+
+    /**
+     * Compresses a string using the LZW algorithm.
+     *
+     * @param uncompressed The string to be compressed. Can be null.
+     * @return A list of integers representing the compressed data. Returns an empty
+     * list if the input is null or empty.
+     */
+    public static List<Integer> compress(String uncompressed) {
+        if (uncompressed == null || uncompressed.isEmpty()) {
+            return new ArrayList<>();
+        }
+
+        // Initialize dictionary with single characters (ASCII 0-255)
+        int dictSize = 256;
+        Map<String, Integer> dictionary = new HashMap<>();
+        for (int i = 0; i < dictSize; i++) {
+            dictionary.put("" + (char) i, i);
+        }
+
+        String w = "";
+        List<Integer> result = new ArrayList<>();
+        for (char c : uncompressed.toCharArray()) {
+            String wc = w + c;
+            if (dictionary.containsKey(wc)) {
+                // If the new string is in the dictionary, extend the current string
+                w = wc;
+            } else {
+                // Otherwise, output the code for the current string
+                result.add(dictionary.get(w));
+                // Add the new string to the dictionary
+                dictionary.put(wc, dictSize++);
+                // Start a new current string
+                w = "" + c;
+            }
+        }
+
+        // Output the code for the last remaining string
+        result.add(dictionary.get(w));
+        return result;
+    }
+
+    /**
+     * Decompresses a list of integers back into a string using the LZW algorithm.
+     *
+     * @param compressed A list of integers representing the compressed data. Can be
+     *                   null.
+     * @return The original, uncompressed string. Returns an empty string if the
+     * input is null or empty.
+     */
+    public static String decompress(List<Integer> compressed) {
+        if (compressed == null || compressed.isEmpty()) {
+            return "";
+        }
+
+        // Initialize dictionary with single characters (ASCII 0-255)
+        int dictSize = 256;
+        Map<Integer, String> dictionary = new HashMap<>();
+        for (int i = 0; i < dictSize; i++) {
+            dictionary.put(i, "" + (char) i);
+        }
+
+        // Decompress the first code
+        String w = "" + (char) (int) compressed.removeFirst();
+        StringBuilder result = new StringBuilder(w);
+
+        for (int k : compressed) {
+            String entry;
+            if (dictionary.containsKey(k)) {
+                // The code is in the dictionary
+                entry = dictionary.get(k);
+            } else if (k == dictSize) {
+                // Special case for sequences like "ababab"
+                entry = w + w.charAt(0);
+            } else {
+                throw new IllegalArgumentException("Bad compressed k: " + k);
+            }
+
+            result.append(entry);
+
+            // Add new sequence to the dictionary
+            dictionary.put(dictSize++, w + entry.charAt(0));
+
+            w = entry;
+        }
+        return result.toString();
+    }
+}
diff --git a/src/test/java/com/thealgorithms/compression/ArithmeticCodingTest.java b/src/test/java/com/thealgorithms/compression/ArithmeticCodingTest.java
new file mode 100644
index 000000000000..8e51fe5eb463
--- /dev/null
+++ b/src/test/java/com/thealgorithms/compression/ArithmeticCodingTest.java
@@ -0,0 +1,154 @@
+package com.thealgorithms.compression;
+
+import static org.junit.jupiter.api.Assertions.assertEquals;
+import static org.junit.jupiter.api.Assertions.assertNotNull;
+import static org.junit.jupiter.api.Assertions.assertThrows;
+import static org.junit.jupiter.api.Assertions.assertTrue;
+
+import java.math.BigDecimal;
+import java.util.HashMap;
+import java.util.Map;
+import org.junit.jupiter.api.Test;
+
+class ArithmeticCodingTest {
+
+    @Test
+    void testThrowsExceptionForNullOrEmptyInput() {
+        // Test that null input throws IllegalArgumentException
+        assertThrows(IllegalArgumentException.class, () -> ArithmeticCoding.compress(null));
+
+        // Test that empty string throws IllegalArgumentException
+        assertThrows(IllegalArgumentException.class, () -> ArithmeticCoding.compress(""));
+    }
+
+    @Test
+    void testCompressionAndDecompressionSimple() {
+        String original = "BABA";
+        Map<Character, ArithmeticCoding.Symbol> probTable = ArithmeticCoding.calculateProbabilities(original);
+        BigDecimal compressed = ArithmeticCoding.compress(original);
+
+        // Verify that compression produces a valid number in [0, 1)
+        assertNotNull(compressed);
+        assertTrue(compressed.compareTo(BigDecimal.ZERO) >= 0);
+        assertTrue(compressed.compareTo(BigDecimal.ONE) < 0);
+
+        // Verify decompression restores the original string
+        String decompressed = ArithmeticCoding.decompress(compressed, original.length(), probTable);
+        assertEquals(original, decompressed);
+    }
+
+    @Test
+    void testSymmetryWithComplexString() {
+        String original = "THE_QUICK_BROWN_FOX_JUMPS_OVER_THE_LAZY_DOG";
+        Map<Character, ArithmeticCoding.Symbol> probTable = ArithmeticCoding.calculateProbabilities(original);
+        BigDecimal compressed = ArithmeticCoding.compress(original);
+
+        // Verify compression produces a number in valid range
+        assertTrue(compressed.compareTo(BigDecimal.ZERO) >= 0);
+        assertTrue(compressed.compareTo(BigDecimal.ONE) < 0);
+
+        // Verify symmetry: decompress(compress(x)) == x
+        String decompressed = ArithmeticCoding.decompress(compressed, original.length(), probTable);
+        assertEquals(original, decompressed);
+    }
+
+    @Test
+    void testSymmetryWithRepetitions() {
+        String original = "MISSISSIPPI";
+        Map<Character, ArithmeticCoding.Symbol> probTable = ArithmeticCoding.calculateProbabilities(original);
+        BigDecimal compressed = ArithmeticCoding.compress(original);
+
+        // Verify compression produces a number in valid range
+        assertTrue(compressed.compareTo(BigDecimal.ZERO) >= 0);
+        assertTrue(compressed.compareTo(BigDecimal.ONE) < 0);
+
+        // Verify the compression-decompression cycle
+        String decompressed = ArithmeticCoding.decompress(compressed, original.length(), probTable);
+        assertEquals(original, decompressed);
+    }
+
+    @Test
+    void testSingleCharacterString() {
+        String original = "AAAAA";
+        Map<Character, ArithmeticCoding.Symbol> probTable = ArithmeticCoding.calculateProbabilities(original);
+        BigDecimal compressed = ArithmeticCoding.compress(original);
+
+        // Even with a single unique character, compression should work
+        assertTrue(compressed.compareTo(BigDecimal.ZERO) >= 0);
+        assertTrue(compressed.compareTo(BigDecimal.ONE) < 0);
+
+        String decompressed = ArithmeticCoding.decompress(compressed, original.length(), probTable);
+        assertEquals(original, decompressed);
+    }
+
+    @Test
+    void testCompressionOutputDemo() {
+        // Demonstrate actual compression output similar to LZW test
+        String original = "BABA";
+        BigDecimal compressed = ArithmeticCoding.compress(original);
+
+        // Example: "BABA" compresses to approximately 0.625
+        // This shows that the entire message is encoded as a single number
+        System.out.println("Original: " + original);
+        System.out.println("Compressed to: " + compressed);
+        System.out.println("Compression: " + original.length() + " characters -> 1 BigDecimal number");
+
+        // Verify the compressed value is in valid range [0, 1)
+        assertTrue(compressed.compareTo(BigDecimal.ZERO) >= 0);
+        assertTrue(compressed.compareTo(BigDecimal.ONE) < 0);
+    }
+
+    @Test
+    void testProbabilityTableCalculation() {
+        // Test that probability table is calculated correctly
+        String text = "AABBC";
+        Map<Character, ArithmeticCoding.Symbol> probTable = ArithmeticCoding.calculateProbabilities(text);
+
+        // Verify all characters are in the table
+        assertTrue(probTable.containsKey('A'));
+        assertTrue(probTable.containsKey('B'));
+        assertTrue(probTable.containsKey('C'));
+
+        // Verify probability ranges are valid
+        for (ArithmeticCoding.Symbol symbol : probTable.values()) {
+            assertTrue(symbol.low().compareTo(BigDecimal.ZERO) >= 0);
+            assertTrue(symbol.high().compareTo(BigDecimal.ONE) <= 0);
+            assertTrue(symbol.low().compareTo(symbol.high()) < 0);
+        }
+    }
+
+    @Test
+    void testDecompressionWithMismatchedProbabilityTable() {
+        // Test decompression with a probability table that doesn't match the original
+        String original = "ABCD";
+        BigDecimal compressed = ArithmeticCoding.compress(original);
+
+        // Create a different probability table (for "XYZ" instead of "ABCD")
+        Map<Character, ArithmeticCoding.Symbol> wrongProbTable = ArithmeticCoding.calculateProbabilities("XYZ");
+
+        // Decompression with wrong probability table should produce incorrect output
+        String decompressed = ArithmeticCoding.decompress(compressed, original.length(), wrongProbTable);
+
+        // The decompressed string will be different from original (likely all 'X', 'Y', or 'Z')
+        // This tests the edge case where the compressed value doesn't fall into expected ranges
+        assertNotNull(decompressed);
+        assertEquals(original.length(), decompressed.length());
+    }
+
+    @Test
+    void testDecompressionWithValueOutsideSymbolRanges() {
+        // Create a custom probability table
+        Map<Character, ArithmeticCoding.Symbol> probTable = new HashMap<>();
+        probTable.put('A', new ArithmeticCoding.Symbol(new BigDecimal("0.0"), new BigDecimal("0.5")));
+        probTable.put('B', new ArithmeticCoding.Symbol(new BigDecimal("0.5"), new BigDecimal("1.0")));
+
+        // Use a compressed value that should decode properly
+        BigDecimal compressed = new BigDecimal("0.25"); // Falls in 'A' range
+
+        String decompressed = ArithmeticCoding.decompress(compressed, 3, probTable);
+
+        // Verify decompression completes (even if result might not be meaningful)
+        assertNotNull(decompressed);
+        assertEquals(3, decompressed.length());
+    }
+}
diff --git a/src/test/java/com/thealgorithms/compression/LZWTest.java b/src/test/java/com/thealgorithms/compression/LZWTest.java
new file mode 100644
index 000000000000..7f0c7503c822
--- /dev/null
+++ b/src/test/java/com/thealgorithms/compression/LZWTest.java
@@ -0,0 +1,104 @@
+package com.thealgorithms.compression;
+
+import static org.junit.jupiter.api.Assertions.assertEquals;
+import static org.junit.jupiter.api.Assertions.assertThrows;
+import static org.junit.jupiter.api.Assertions.assertTrue;
+
+import java.util.ArrayList;
+import java.util.Collections;
+import java.util.List;
+import org.junit.jupiter.api.Test;
+
+class LZWTest {
+
+    @Test
+    void testNullAndEmptyInputs() {
+        // Test that a null input to compress returns an empty list
+        assertTrue(LZW.compress(null).isEmpty());
+
+        // Test that a null input to decompress returns an empty string
+        assertEquals("", LZW.decompress(null));
+
+        // Test that an empty input to compress returns an empty list
+        assertTrue(LZW.compress("").isEmpty());
+
+        // Test that an empty input to decompress returns an empty string
+        assertEquals("", LZW.decompress(Collections.emptyList()));
+    }
+
+    @Test
+    void testCompressionAndDecompressionWithSimpleString() {
+        // Test a classic example string
+        String original = "TOBEORNOTTOBEORTOBEORNOT";
+        List<Integer> compressed = LZW.compress(original);
+
+        // Create the expected output list
+        List<Integer> expectedOutput = List.of(84, 79, 66, 69, 79, 82, 78, 79, 84, 256, 258, 260, 265, 259, 261, 263);
+
+        // This assertion will fail if the output is not what we expect
+        assertEquals(expectedOutput, compressed);
+
+        // This assertion ensures the decompressed string is correct
+        String decompressed = LZW.decompress(compressed);
+        assertEquals(original, decompressed);
+    }
+
+    @Test
+    void testCompressionWithRepeatedChars() {
+        // Test a string with long runs of the same character
+        String original = "AAAAABBBBBAAAAA";
+        List<Integer> compressed = LZW.compress(original);
+        String decompressed = LZW.decompress(compressed);
+        assertEquals(original, decompressed);
+    }
+
+    @Test
+    void testCompressionWithUniqueChars() {
+        // Test a string with no repetitions
+        String original = "ABCDEFG";
+        List<Integer> compressed = LZW.compress(original);
+        String decompressed = LZW.decompress(compressed);
+        assertEquals(original, decompressed);
+    }
+
+    @Test
+    void testSymmetry() {
+        // Test that compressing and then decompressing a complex string returns the
+        // original
+        String original = "THE_QUICK_BROWN_FOX_JUMPS_OVER_THE_LAZY_DOG";
+        List<Integer> compressed = LZW.compress(original);
+        String decompressed = LZW.decompress(compressed);
+        assertEquals(original, decompressed);
+
+        // Another symmetry test with special characters and patterns
+        String original2 = "ababcbababa";
+        List<Integer> compressed2 = LZW.compress(original2);
+        String decompressed2 = LZW.decompress(compressed2);
+        assertEquals(original2, decompressed2);
+    }
+
+    @Test
+    void testInvalidCompressedData() {
+        // Test that decompressing with an invalid code throws IllegalArgumentException
+        // Create a list with a code that doesn't exist in the dictionary
+        List<Integer> invalidCompressed = new ArrayList<>();
+        invalidCompressed.add(65); // 'A' - valid
+        invalidCompressed.add(999); // Invalid code (not in dictionary)
+
+        // This should throw IllegalArgumentException with message "Bad compressed k: 999"
+        IllegalArgumentException exception = assertThrows(IllegalArgumentException.class, () -> LZW.decompress(invalidCompressed));
+
+        assertTrue(exception.getMessage().contains("Bad compressed k: 999"));
+    }
+
+    @Test
+    void testDecompressionWithGapInDictionary() {
+        // Test with codes that skip dictionary entries
+        List<Integer> invalidCompressed = new ArrayList<>();
+        invalidCompressed.add(84); // 'T' - valid
+        invalidCompressed.add(500); // Way beyond current dictionary size
+
+        // This should throw IllegalArgumentException
+        assertThrows(IllegalArgumentException.class, () -> LZW.decompress(invalidCompressed));
+    }
+}