diff --git a/agb-image-converter/src/colour.rs b/agb-image-converter/src/colour.rs
new file mode 100644
index 00000000..4592a450
--- /dev/null
+++ b/agb-image-converter/src/colour.rs
@@ -0,0 +1,12 @@
+#[derive(Debug, Clone, Copy, PartialEq, Eq, Hash)]
+pub struct Colour {
+    pub r: u8,
+    pub g: u8,
+    pub b: u8,
+}
+
+impl Colour {
+    pub fn from_rgb(r: u8, g: u8, b: u8) -> Self {
+        Colour { r, g, b }
+    }
+}
diff --git a/agb-image-converter/src/image_loader.rs b/agb-image-converter/src/image_loader.rs
new file mode 100644
index 00000000..aa3f5921
--- /dev/null
+++ b/agb-image-converter/src/image_loader.rs
@@ -0,0 +1,37 @@
+use std::path;
+
+use image::GenericImageView;
+
+use crate::colour::Colour;
+
+pub(crate) struct Image {
+    pub width: usize,
+    pub height: usize,
+    colour_data: Vec<Colour>,
+}
+
+impl Image {
+    pub fn load_from_file(image_path: &path::Path) -> Self {
+        let img = image::open(image_path).expect("Expected image to exist");
+        let (width, height) = img.dimensions();
+
+        let width = width as usize;
+        let height = height as usize;
+
+        let mut colour_data = Vec::with_capacity(width * height);
+
+        for (_, _, pixel) in img.pixels() {
+            colour_data.push(Colour::from_rgb(pixel[0], pixel[1], pixel[2]));
+        }
+
+        Image {
+            width,
+            height,
+            colour_data,
+        }
+    }
+
+    pub fn colour(&self, x: usize, y: usize) -> Colour {
+        self.colour_data[x + y * self.width]
+    }
+}
diff --git a/agb-image-converter/src/lib.rs b/agb-image-converter/src/lib.rs
index 10e07096..3f3905ca 100644
--- a/agb-image-converter/src/lib.rs
+++ b/agb-image-converter/src/lib.rs
@@ -1,6 +1,10 @@
-use std::path;
+use std::path::PathBuf;
 
 mod colour;
+mod image_loader;
+mod palette16;
+
+use image_loader::Image;
 
 pub use colour::Colour;
 
@@ -10,11 +14,59 @@ pub enum TileSize {
     Tile16,
 }
 
+impl TileSize {
+    fn to_size(&self) -> usize {
+        match &self {
+            TileSize::Tile8 => 8,
+            TileSize::Tile16 => 16,
+        }
+    }
+}
+
 pub struct ImageConverterConfig {
     pub transparent_colour: Option<Colour>,
     pub tile_size: TileSize,
-    pub input_file: path::PathBuf,
-    pub output_file: path::PathBuf,
+    pub input_image: PathBuf,
+    pub output_file: PathBuf,
 }
 
-pub fn convert_image(setting: &ImageConverterConfig) {}
+pub fn convert_image(settings: &ImageConverterConfig) {
+    let image = Image::load_from_file(&settings.input_image);
+
+    let tile_size = settings.tile_size.to_size();
+    if image.width % tile_size != 0 || image.height % tile_size != 0 {
+        panic!("Image size not a multiple of tile size");
+    }
+
+    let optimiser = optimiser_for_image(&image, tile_size);
+    let optimisation_results = optimiser.optimise_palettes(settings.transparent_colour);
+
+    println!("{:?}", optimisation_results);
+}
+
+fn optimiser_for_image(image: &Image, tile_size: usize) -> palette16::Palette16Optimiser {
+    let tiles_x = image.width / tile_size;
+    let tiles_y = image.height / tile_size;
+
+    let mut palette_optimiser = palette16::Palette16Optimiser::new();
+
+    for y in 0..tiles_y {
+        for x in 0..tiles_x {
+            let mut palette = palette16::Palette16::new();
+
+            for j in 0..tile_size {
+                for i in 0..tile_size {
+                    let colour = image.colour(x * tile_size + i, y * tile_size + j);
+
+                    if !palette.add_colour(colour) {
+                        panic!("Tile contains more than 16 colours");
+                    }
+                }
+            }
+
+            palette_optimiser.add_palette(palette);
+        }
+    }
+
+    palette_optimiser
+}
diff --git a/agb-image-converter/src/palette16.rs b/agb-image-converter/src/palette16.rs
new file mode 100644
index 00000000..5522c937
--- /dev/null
+++ b/agb-image-converter/src/palette16.rs
@@ -0,0 +1,170 @@
+use crate::colour::Colour;
+use std::collections::HashSet;
+
+const MAX_COLOURS: usize = 256;
+const MAX_COLOURS_PER_PALETTE: usize = 16;
+
+#[derive(Debug, Clone, Eq, PartialEq, Hash)]
+pub(crate) struct Palette16 {
+    colours: Vec<Colour>,
+}
+
+impl Palette16 {
+    pub fn new() -> Self {
+        Palette16 {
+            colours: Vec::with_capacity(MAX_COLOURS_PER_PALETTE),
+        }
+    }
+
+    pub fn add_colour(&mut self, colour: Colour) -> bool {
+        if self.colours.contains(&colour) {
+            return false;
+        }
+
+        if self.colours.len() == MAX_COLOURS_PER_PALETTE {
+            panic!("Can have at most 16 colours in a single palette");
+        }
+        self.colours.push(colour);
+        true
+    }
+
+    fn union_length(&self, other: &Palette16) -> usize {
+        self.colours
+            .iter()
+            .chain(&other.colours)
+            .collect::<HashSet<_>>()
+            .len()
+    }
+
+    fn is_satisfied_by(&self, other: &Palette16) -> bool {
+        self.colours
+            .iter()
+            .collect::<HashSet<_>>()
+            .is_subset(&other.colours.iter().collect::<HashSet<_>>())
+    }
+}
+
+pub(crate) struct Palette16Optimiser {
+    palettes: Vec<Palette16>,
+    colours: Vec<Colour>,
+}
+
+#[derive(Debug)]
+pub(crate) struct Palette16OptimisationResults {
+    pub optimised_palettes: Vec<Palette16>,
+    pub assignments: Vec<usize>,
+}
+
+impl Palette16Optimiser {
+    pub fn new() -> Self {
+        Palette16Optimiser {
+            palettes: vec![],
+            colours: Vec::new(),
+        }
+    }
+
+    pub fn add_palette(&mut self, palette: Palette16) {
+        self.palettes.push(palette.clone());
+
+        for colour in palette.colours {
+            if self.colours.contains(&colour) {
+                continue;
+            }
+
+            self.colours.push(colour);
+        }
+
+        if self.colours.len() > MAX_COLOURS {
+            panic!("Cannot have over 256 colours");
+        }
+    }
+
+    pub fn optimise_palettes(
+        &self,
+        transparent_colour: Option<Colour>,
+    ) -> Palette16OptimisationResults {
+        let mut assignments = vec![0; self.palettes.len()];
+        let mut optimised_palettes = vec![];
+
+        let mut unsatisfied_palettes = self
+            .palettes
+            .iter()
+            .cloned()
+            .collect::<HashSet<Palette16>>();
+
+        while unsatisfied_palettes.len() > 0 {
+            let palette = self.find_maximal_palette_for(&unsatisfied_palettes, transparent_colour);
+
+            for test_palette in unsatisfied_palettes.clone() {
+                if test_palette.is_satisfied_by(&palette) {
+                    unsatisfied_palettes.remove(&test_palette);
+                }
+            }
+
+            for (i, overall_palette) in self.palettes.iter().enumerate() {
+                if overall_palette.is_satisfied_by(&palette) {
+                    assignments[i] = optimised_palettes.len();
+                }
+            }
+
+            optimised_palettes.push(palette);
+
+            if optimised_palettes.len() == MAX_COLOURS / MAX_COLOURS_PER_PALETTE {
+                panic!("Failed to find covering palettes");
+            }
+        }
+
+        Palette16OptimisationResults {
+            assignments,
+            optimised_palettes,
+        }
+    }
+
+    fn find_maximal_palette_for(
+        &self,
+        unsatisfied_palettes: &HashSet<Palette16>,
+        transparent_colour: Option<Colour>,
+    ) -> Palette16 {
+        let mut palette = Palette16::new();
+
+        if let Some(transparent_colour) = transparent_colour {
+            palette.add_colour(transparent_colour);
+        }
+
+        loop {
+            let mut colour_usage = vec![0; MAX_COLOURS];
+            let mut a_colour_is_used = false;
+
+            for current_palette in unsatisfied_palettes {
+                if palette.union_length(&current_palette) > MAX_COLOURS_PER_PALETTE {
+                    continue;
+                }
+
+                for colour in &current_palette.colours {
+                    if let Some(colour_index) = self.colours.iter().position(|c| c == colour) {
+                        colour_usage[colour_index] += 1;
+                        a_colour_is_used = true;
+                    }
+                }
+            }
+
+            if !a_colour_is_used {
+                return palette;
+            }
+
+            let best_index = colour_usage
+                .iter()
+                .enumerate()
+                .max_by(|(_, usage1), (_, usage2)| usage1.cmp(usage2))
+                .unwrap()
+                .0;
+
+            let best_colour = self.colours[best_index];
+
+            palette.add_colour(best_colour);
+            if palette.colours.len() == MAX_COLOURS_PER_PALETTE {
+                return palette;
+            }
+        }
+    }
+}