We present a new local Craya--Herring decomposition of three-dimensional vector fields using compactly supported biorthogonal wavelets. Therewith vector-valued function spaces are split into two orthogonal components, i.e., curl-free and divergence-free spaces. The latter is further decomposed into toroidal and poloidal parts to decorrelate horizontal from vertical contributions which are of particular interest in geophysical turbulence. Applications are shown for isotropic, rotating and stratified turbulent flows. A comparison between isotropic and anisotropic orthogonal Craya--Herring wavelets, built in Fourier space and thus not compactly supported, is also given.