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This paper proposes a statistically optimum adaptive wavelet packet (WP) thresholding function for image denoising based on the generalized Gaussian distribution. It applies computationally efficient multilevel WP decomposition to noisy images to obtain the best tree or optimal wavelet basis, utilizing Shannon entropy. It selects an adaptive threshold value which is level and subband dependent based on analyzing the statistical parameters of subband coefficients. In the utilized thresholding function, which is based on a maximum a posteriori estimate, the modified version of dominant coefficients was estimated by optimal linear interpolation between each coefficient and the mean value of the corresponding subband. Experimental results, on several test images under different noise intensity conditions, show that the proposed algorithm, called OLI-Shrink, yields better peak signal noise ratio and superior visual image quality—measured by universal image quality index—compared to standard denoising methods, especially in the presence of high noise intensity. It also outperforms some of the best state-of-the-art wavelet-based denoising techniques.