Abstract: A novel method is put forward for studying the instability of vapor water two phase flow. This method combines data compression and denoising based on wavelet analysis with the iterated function system（IFS）fractal image code techniques. Firstly, the experiment data are compressed and denoised by wavelet and the data signals can be expressed by the low and high main frequency coefficients of wavelet, and then the fractal codes are abstracted from the compressed experiment data based on IFS. The fractal codes can be divided into low and high frequency parts automatically. The farther studies on the instability of vapor water two phase flow can be carried out based on these fractal codes.