The　traditional　Welsh＇s　grayscale　image　colorization　method　for　color　transferring　is　based　on　pixel＇s　luminance　information　only.　The　method　generally　cannot　ensure　the　continuity　of　image　transferring　effect　in　space.　This　paper　presents　a　color　transfer　algorithm　based　on　neighborhood　correlation　and　optimization　techniques,　which　not　only　considers　neighborhood＇s　luminance　information　but　also　makes　full　use　of　colored　pixel＇s　color　information.　The　algorithm　automatically　produces　the　initial　colorized　image　via　a　color　transfer　method,　removes　the　color　information　of　pixel　that　is　completely　different　from　neighborhood　pixels　to　form　the　regions　of　color　seed　and　then　use　some　optimization　techniques　to　complete　the　colorization　process　by　diffusing　the　distribution　of　color　seed　to　the　corresponding　regions　of　image.　Experimental　results　show　that　the　new　algorithm　improves　the　drawback　of　the　Welsh＇s　algorithm,　and　the　color　of　the　result　image　is　more　natural　and　delicate.　©　2011　IEEE.