To improve the accuracy of defect detection in bank note sorting and decrease the effects of cracks and scratches of bank note on detecting,a new algorithm based on wavelet decomposition is proposed,in which affine transform and wavelet transform are applied to bank note image registration and the edge information is extracted by Kirsch operator,while the defect feature is extracted from edge intensity differential.The bank note image is divided into several fixed size subzones,in each of which the defect feature is calculated to judge the degree of contamination.The experimental results reveal that the proposed feature extraction method is robust to the gray intensity change in each subbone,and obtains high recognition rate and high stability.This method has already been used in practical bank note sorting system.