In this paper we show that for memoryless time-discrete sources with a bounded fidelity criterion, the limiting average distortion achievable by tree codes of rate

is

, the solution of the equation

, where

denotes the usual rate distortion function. Thus the performance of tree codes is as good as that of block codes. Some theoretical and experimental results are also discussed indicating that tree codes and corresponding encoding algorithms exist having for given values of

and

an implementation complexity that is far smaller than the one obtainable from block codes.