This paper describes a wavelet domain restoration algorithm, based on a so-called C/D/C system model that accounts for system blur at the image acquisition level, for the potentially important effects of aliasing, and for additive noise. Wavelet domain modeling discretizes the image acquisition kernel, and in this way the image restoration problem is formulated as a discrete least squares problem. The treatment of noise is related to the singular values of the image acquisition kernel. The performance of our wavelet domain restoration algorithm is assessed. We show that pixel- scale features can be restored exactly in the absence of noise. In the presence of noise results are similar, except for some noise-amplification and ringing artifacts that we control with the proper choice of an algorithm parameter. This paper extends work in wavelet domain C/D/C model-based restoration, and builds on research using the C/D/C model in digital image restoration.