In　digital　camera　systems,　the　color　filter　array　(CFA)　is　used　to　sample　the　colors.　However,　each　pixel　represents　only　one　of　the　color　bands.　To　produce　a　full-resolution　color　image,　the　recorded　image　must　be　processed　to　estimate　the　values　of　the　pixels　for　all　the　other　color　bands.　This　restoration　process　is　often　implemented　by　interpolation.　The　interpolation　algorithm　for　the　charge-coupled　device　(CCD)　color　filter　array　is　one　of　the　most　important　factors　for　the　quality　of　the　restored　full　color　images.　If　interpolation　is　not　performed　appropriately,　images　suffer　from　serious　visible　color　artifacts.　There　have　been　many　solutions　to　the　problem,　in　order　to　avoid　serious　distortion　in　high　frequency　caused　by　bilinear　interpolation　and　expensive　computation　cost　caused　by　the　interpolation　using　alternating　projection,　and　the　images　sampled　from　the　color　filter　array　are　analyzed　in　Fourier　domain.　The　CFA　images　could　be　interpreted　as　a　luminance　component　located　in　baseband　and　the　color　difference　components　modulated　in　high　bands.　According　to　this,　a　new　interpolation　algorithm　based　on　color　difference　modulation　is　proposed　in　this　paper.　Compared　with　some　other　algorithms,　the　proposed　method　outperforms　all　them,　both　visually　and　in　terms　color　peak-signal-to-noise　ratio　(CPSNR)　and　ΔES.