Abstract: Signal CCD/CMOS sensors capture image information by covering the sensor surface with a color filter array (CFA). For each pixel, only one of three primary colors(red, green and blue) can pass through the CFA. The other two missing color components are estimated by the values of surrounding pixels. The first step was to estimate interpolation direction taking advantage of the pixels in 55 template and use the optimal weighting factors to interpolate G components. The second step was to interpolate R(B) components at the location of B(R) using the interpolation operator based on two-dimensional rational function. The third step was to interpolate R and B components at the location of G components by color difference interpolation. Lastly, the iterative interpolation repeated until approaching the optimal results using variance-constrained condition. Through Matlab simulate experiments based on 24 Kodak images and the images captured from our camera, the proposed algorithm outperforms both in visual and numerical aspects.