A novel electroholographic bandwidth compression technique, fringelet bandwidth compression, is described and implemented. This technique uses spatial subsampling to reduce the bandwidth and complexity of holographic fringe computation for real‐time 3‐D holographic displays. Fringelet bandwidth compression is a type of diffraction‐specific fringe computation, an approach that considers only the reconstruction process in holographic imaging. The fringe pattern is treated as a spectrum that is sampled in space (as holographic elements or ‘‘hogels’’) and in spatial frequency (as ‘‘hogel vectors’’). Fringelet bandwidth compression achieves a compression ratio of 16:1 without conspicuously degrading image quality. Further increase in compression ratio and speed is possible with additional image degradation. Fringelet decoding is extremely simple, involving the replication of fringelet sample values. This simplicity enables an overall increase in fringe computation speed of over 3000 times compared to conventional interference‐based methods. The speed of fringelet bandwidth compression has enabled the generation of images at nearly interactive rates: under 4.0 s per hand‐sized (1‐l) 3‐D image generated from a 36‐Mbyte fringe. © 1996 Society of Photo−Optical Instrumentation Engineers.