Unlike MSS LANDSAT imagery and other photography, the specific characteristics of the intensity of water and shadow in an SAR image make the task of discriminating them extremely difficult. In this thesis, we analyze the reflectivity mechanism of water and shadow on radar imagery and describe a scene analysis system which consists of a texture preserving noise removal procedure as the preprocessing step, a probabilistic relaxation algorithm to do the low level labeling and a spatial reasoning procedure based on a relational model to perform the high level interpretation. The experimental results obtained from the SAR images are presented to illustrate the performance of this system. / M.S.