Soliton-effect optical pulse compression in a dispersion-decreasing fiber (DDF) based on Mach-Zehnder interferometer (MZI) is studied numerically. The scheme utilizes both the higher-order soliton compression and the nonlinear switching effects within the MZI. Numerical results show that the scheme cannot only permit much more efficient pulse compression than the DDF-based adiabatic soliton compression technique, but also compress wide pulse which will be impossible with the adiabatic soliton compression technique. For a 20-ps input pulse, the compression ratio by the present scheme is as high as 76.4. Results also show that the compression is quite tolerant of small variation of initial parameters such as the arm length of the MZI, the input to output dispersion ratios of the two arms, and the peak power of the input pulse. The influence of higher-order effects such as Raman self-frequency shift and the third-order dispersion on pulse compression is also investigated.