This paper presents a novel approach for speckle reduction and coherence enhancement of ultrasound images based on nonlinear coherent diffusion (NCD) model. The proposed NCD model combines three different models. According to speckle extent and image anisotropy, the NCD model changes progressively from isotropic diffusion through anisotropic coherent diffusion to, finally, mean curvature motion. This structure maximally low-pass filters those parts of the image that correspond to fully developed speckle, while substantially preserving information associated with resolved-object structures. The proposed implementation algorithm utilizes an efficient discretization scheme that allows for real-time implementation on commercial systems. The theory and implementation of the new technique are presented and verified using phantom and clinical ultrasound images. In addition, the results from previous techniques are compared with the new method to demonstrate its performance.