To enhance the visual quality of an image that is degraded by uneven light, an effective method is to estimate the illumination component and compress it. Some previous methods have either defects of halo artifacts or contrast loss in the enhanced image due to incorrect estimation. In this paper, we discuss this problem and propose a novel method to estimate the illumination. The illumination is obtained by iteratively solving a nonlinear diffusion equation. During the diffusion process, surround suppression is embedded in the conductance function to specially enhance the diffusive strength in textural areas of the image. The proposed estimation method has the following two merits: 1) the boundary areas are preserved in the illumination, and thus halo artifacts are prevented and 2) the textural details are preserved in the reflectance to not suffer from illumination compression, which contributes to the contrast enhancement in the result. Experimental results show that the proposed algorithm achieves excellent performance in artifact removal and local contrast enhancement.