The key to the wavelet based denoising techniques is how to manipulate the wavelet coefficients. By referring to the idea of Inclusive-OR in the design of circuits, this paper proposes a new algorithm called wavelet domain Inclusive-OR denoising algorithm (WDIDA), which distinguishes the wavelet coefficients belonging to image or noise by considering their phases and modulus maxima simultaneously. Using this new algorithm, the denoising effects are improved and the computation time is reduced. Furthermore, in order to enhance the edges of the image but not magnify noise, a contrast nonlinear enhancing algorithm is presented according to human visual properties. Compared with traditional enhancing algorithms, the algorithm that we proposed has a better noise reducing performance, preserving edges and improving the visual quality of images.