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Hmm...that might be a bit of a problem. If the image is for display on the web then you're limited to GIF or PNG if you want to use transparency. Unfortunately, there are problems with both formats. GIF has a limited palette of colours, so it does not handle gradients well, while with PNG there are well-known issues with transparency not working correctly in Internet Explorer.
The other option (if your web page background is a solid colour) is to use a JPG and fade the background colour of your image into the same colour as the background of your web page. I've used this trick before and it seems to work OK.
Any chance of posting the image that you want to fade? Actually seeing it might give someone an idea of how to do it.
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