The embedding distortion and the robustness to quality scalable image coding are two complementary watermarking requirements. This work proposes a novel concept of scalable image watermarking to generate a distortion-constrained robustness scalable watermarked image code stream which consists of hierarchically nested joint distortion-robustness coding atoms. The code stream is generated using a new wavelet domain binary tree guided rules-based blind watermarking algorithm. The code stream can be truncated at any distortion-robustness atom level to generate the watermarked image with the desired distortion-robustness requirements. A universal blind extractor is capable of extracting watermark data from the watermarked images. The simulation results verify the feasibility of the proposed concept, its applications and its improved robustness to quality scalable content adaptation (JPEG 2000).