Abstract: In the analysis and IHS transform we found that total intensity is obtained through a third from each red, green and blue in calculation of intensity of IHS transformation. As the human eye is the most sensitive to green (60%), followed by red (30%), moreover is blue (10%), therefore, the formula of intensity component has been modified in this paper. On this basis, a image fusion method of combined the improved IHS transform with wavelet transform has been presented. First, the improved IHS transform for multispectral image is conducted, and the I component and high-resolution panchromatic image are decomposed using wavelet transform, respectively, and the low frequency and high frequency coefficient of high-resolution panchromatic image are fused with those of the I component based on local energy and on local variance, respectively. Finally, IHS inverse transformation is conducted, and the fusion result images are obtained. Results show that the proposed method in this paper has an advantage in keeping the source image spectral characteristics and also keep the spatial fine structure of the source image, and decrease distortion degree of fused image.