Permutation codes are an interesting mathematical tool which can be used to devise both lossy compression schemes and modulation schemes for digital transmission systems. Vector permutation codes, a more powerful extension of scalar permutation codes, were recently introduced for the purpose of source compression. This work presents new contributions to this theory and also introduces vector permutation codes for the purpose of modulation. For source compression, it is proved that vector permutation codes (VPC) have an asymptotical performance equal to that of an entropy-constrained vector quantizer (ECVQ). Based on this development, an efficient method is proposed for VPC design. Experimental results for Gaussian and uniform sources show that the codes designed by this method have indeed a good performance: VPC s are exhibited whose performances are similar to that of ECVQ and superior to those of their scalar counterparts. In the context of digital transmission, it is verified that also vector permutation modulation (VPM) is superior in performance to scalar permutation modulation. Expressions are developed for the optimal design of VPM, and a method is presented for maximum-likelihood detection of VPM in AWGN and fading channels.