A method for the radiometric correction of satellite imagery over mountainous terrain has been developed to remove atmospheric and topographic effects. The algorithm accounts for horizontally varying atmospheric conditions and also includes the height dependence of the atmospheric radiance and transmittance functions to simulate the simplified properties of a three-dimensional atmosphere. A database has been compiled that contains the results of radiative transfer calculations (atmospheric transmittance, path radiance, direct and diffuse solar flux) for a wide range of weather conditions. A digital elevation model is used to obtain information about surface elevation, slope, and orientation. Based on the Lambertian assumption the surface reflectance in rugged terrain is calculated for the specified atmospheric conditions. Regions with extreme illumination geometries sensitive to BRDF effects can be optionally processed separately. The method is restricted to high spatial resolution satellite sensors with a small swath angle such as the Landsat thematic mapper and Systeme pour l'Observation de la Terre high resolution visible, since some simplifying assumptions were made to reduce the required image processing time.