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This paper presents a novel wavelet-domain color image enhancement using filtered directional bases and frequency-adaptive shrinkage. Most traditional noise reduction methods tend to over-suppress high-frequency details. For overcoming this problem we first decompose the input image into flat and edge regions, and remove noise using the alpha map computed from wavelet transform coefficients of LH, HL, and HH bands. After removing noise in the flat region, we further remove noise in edge regions by adaptively shrinking wavelet coefficients based on the entropy. Moreover, we present a new directional transform using wavelet basis and Gaussian low pass filters. The wavelet coefficients of edge regions are inverse transformed by using the filtered wavelet bases. Experimental results show the proposed algorithm can reduce noise without losing sharp details and is suitable for commercial low-cost imaging systems, such as digital cameras, CCTV, and surveillance system.