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A new digital image interpolation method that is performed in the wavelet domain with a least squares algorithm is presented in this paper. This method estimates wavelet coefficients in the high frequency sub-images of the estimated High-Resolution (HR) image from the Low-Resolution (LR) image using a least squares algorithm. An inverse wavelet transform is then performed for the synthesis of the HR image. Experimental results show that the proposed method outperforms other commonly used methods such as the bilinear, bicubic, and traditional least squares methods, objectively and subjectively.