This paper attempts to use image processing methods to reduce the influences of ambient light and scattering effect on the performance of an underwater range finder. The Taguchi method, as well, is employed to increase the repeatability of underwater range finding. In this study, the image processing methods of the least-squares approximation, brightness and contrast adjustment, and primary color processing are presented. The illumination center is also used to estimate the position of the laser spot in the image. In addition, a bandpass optical filter at the receiving end is used to investigate the effects of filters on the quality of range finding. To verify the effectiveness of the proposed image processing methods, a series of DOE process runs are carried out to study effects of the design parameters on quality of range finding. For each image processing method, its corresponding control factors and levels are assigned to an inner orthogonal array. To make the proposed image processing methods robust against noises, both environmental illumination and turbidity are forced into the experiments by utilizing an outer orthogonal array. Images for processing are then captured under different noise conditions in accordance with the allocation of the outer noise array. And, according to the layout of the inner array, the S/N ratio of each treatment combination is calculated. After that, the optimum combination of control factors is predicted through the analysis of variance. Then, the confirmation experiments are carried out to verify that the combination of control factors at the perceived best levels is valid. Based on the results of experiments and analyses, it is found that the least-squares approximation is better than other proposed image processing methods for increasing the quality of range finding. Moreover, the effect of increasing quality of range finding by using the least-squares approximation is superior to that of using a bandpass optical filter. Even though a range finding system has incorporated a bandpass optical filter for filtering out unwanted noises, the quality of range finding can still be increased distinctly while the algorithm of the least-squares approximation is employed. As well, the least-squares approximation is feasible to reduce the scattering effects in the laser images if the size of the sparse backscattering light spot is smaller than that of the target light spot.