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In this paper, an improved algorithm for extracting sea surface currents from X-band nautical radar image sequences is presented. The marine radar images are simulated by first numerically generating current-included ocean surface elevation maps for given sea states and radar parameters. Then the plan position indicator (PPI) radar images are produced via tilt and shadowing modulation processing. From the simulated radar images, current velocity is derived with a modified iterative least square (LS) fitting method in which higher harmonic wave components and aliasing effects are considered. Here, the correct current velocity is found by a proposed iteration-terminating criterion instead of using a fixed number of iterations. Simulated inversion results for a variety of current velocities and sea states validate the algorithm and show that the number of iterations may be reduced while obtaining highly precise measurement. The performance of the algorithm is also tested using real vertically polarized radar data through comparison with the results from other current methods and an acoustic Doppler current profiler (ADCP).