This paper presents a new vector quantization technique called predictive residual vector quantization (PRVQ). It combines the concepts of predictive vector quantization (PVQ) and residual vector quantization (RVQ) to implement a high performance VQ scheme with low search complexity. The proposed PRVQ consists of a vector predictor, designed by a multilayer perceptron, and an RVQ that is designed by a multilayer competitive neural network. A major task in our proposed PRVQ design is the joint optimization of the vector predictor and the RVQ codebooks. In order to achieve this, a new design based on the neural network learning algorithm is introduced. This technique is basically a nonlinear constrained optimization where each constituent component of the PRVQ scheme is optimized by minimizing an appropriate stage error function with a constraint on the overall error. This technique makes use of a Lagrangian formulation and iteratively solves a Lagrangian error function to obtain a locally optimal solution. This approach is then compared to a jointly designed and a closed-loop design approach. In the jointly designed approach, the predictor and quantizers are jointly optimized by minimizing only the overall error. In the closed-loop design, however, a predictor is first implemented; then the stage quantizers are optimized for this predictor in a stage-by-stage fashion. Simulation results show that the proposed PRVQ scheme outperforms the equivalent RVQ (operating at the same bit rate) and the unconstrained VQ by 2 and 1.7 dB, respectively. Furthermore, the proposed PRVQ outperforms the PVQ in the rate-distortion sense with significantly lower codebook search complexity.