This paper addresses a nonlinear multiresolution decomposition scheme based on order statistic (OS) filters with applications in image restoration. In this scheme the input signal is decomposed into multiresolution bands using OS filters of different parameter values. We present the deterministic and statistical properties of the decomposed signals. As an application of the proposed scheme, we consider the restoration of images in the presence of Gaussian and non-Gaussian noise. In the image restoration, nonlinear filtering is performed on decomposed signal components using denoising techniques. Simulations show that this method has better edge and sharp feature preservation and better noise reduction properties than other OS filter based techniques.