We present the results of applying lossless and lossy data compression to a three-dimensional object reconstruction and recognition technique based on phase-shift digital holography. We find that the best lossless (Lempel-Ziv, Lempel-Ziv-Welch, Huffman, Burrows-Wheeler) compression rates can be expected when the digital hologram is stored in an intermediate coding of separate data streams for real and imaginary components. The lossy techniques are based on subsampling, quantization, and discrete Fourier transformation. For various degrees of speckle reduction, we quantify the number of Fourier coefficients that can be removed from the hologram domain, and the lowest level of quantization achievable, without incurring significant loss in correlation performance or significant error in the reconstructed object domain. (C) 2002 Optical Society of America.