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In this paper, we present an effective edge-adaptive error diffusion approach and apply it to electrophoretic display. Unlike traditional error diffusion algorithms that use the fixed threshold, the new algorithm uses chaotic threshold modulation to remove the visual artifacts. To speed up the execution of edge detection, we further propose the gradient-based edge detection instead of the commonly used Sobel edge detection. Experimental results show that the proposed algorithm achieves more satisfying performance over existing error diffusion algorithms for a certain class of images.