Nonlinear shading correction of an image to improve readability and data compression is effected by means for generating a histogram of distribution of gray scale intensity levels, means for calculating from the histogram first, second and third gray scale intensity values, means for determining image polarity, means for determining an acceptable range of background gray scale variation, means for sampling gray scale intensity values in a region around a current pel, means for calculating a correction value for the current pel by comparing the gray scale value of the current pel with the range of background gray scale variation, means for setting the correction value to a predetermined constant if the gray scale value of the current pel is outside the range of acceptable background variation, and means for correcting the current pel gray scale value by subtracting therefrom the correction value to achieve a shading corrected value for the current pel.