Grouping algorithms based on histograms over measured image features have very successfully been applied to textured image segmentation. However, the competing goals of statistical estimation significance demanding few quantization levels versus the necessary richness in representation often prevent a successful application for the color cue, since quantization may result in contouring. We combine a halftoning technique called spatial quantization with distribution-based grouping algorithms to synthesize a powerful color image segmentation technique. The spatial quantization simultaneously determines color palette and halftoning by optimization of a joint cost function. It therefore allows for a highly adapted image representation with a smooth transition of color distributions for non-constant image surfaces.