It is important in image restoration to remove noise while preserving meaningful detail such as blurred thin edges and low-contrast fine features. The existing edgepreserving smoothing methods may inevitably take fine detail as noise or vice versa. In this paper, we propose a new edge-preserving smoothing technique based on a modified anisotropic diffusion. The proposed method can simultaneously preserve edges and fine details while filtering out noise in the diffusion process. Since the fine details in the neighborhood of the image generally have larger gray-level variance than the noisy background, the proposed diffusion model incorporates both local gradient and gray-level variance to preserve edges and fine details while effectively removing noise. Experimental results from a variety of test samples including medical images and artwork images have shown that the proposed anisotropic diffusion scheme can effectively smooth noisy background, yet well preserve edge and fine details i...