Abstract: To develop a new image fusion algorithm, the images of multichannels were decomposed on different frequency bands by pyramid algorithm, and the contrast pyramids of source images could be obtained by thls way. Then, the contrast pyramid of the fused image could be acquired by mutual modulation of the contrast pyramids of source images on the corresponding levels. Finally, the fused image was reconstructed by pyramid algorithm. The new algorithm called multiscale contrast modulation, which was based on modulation technique, was achieved through contrast pyramid. The fused image can preserve the details of each source image, meanwhile, the new multiscale contrast modulation can overcome some drawbacks of the traditional contrast modulation in image fusion.