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This paper proposes a method for enhancing the color images based on nonlinear transfer function and pixel neighborhood by preserving details. In the proposed method, an input RGB color image is converted into an HSV color image. The image enhancement is applied only on the V (luminance value) component of the color image, because change in the H and S component could change the color balance between HSV components. The V component is enhanced in two steps. At first the V channel is divided into smaller blocks and in each block dynamic range compression is carried out using nonlinear transfer function. In the second step each pixels in each block are further enhanced for the adjustment of the image contrast depending upon the centre pixel and its neighborhood. The aim behind dividing the image into blocks is to preserve the details. The original H and S component image and enhanced V component image are converted back to the RGB image. The experimental results show that the proposed method yields better performance by preserving details and no change in color in comparison with other methods.