In the past two decades, the technique of image processing has made its way into every aspect of today?s tech-savvy society. Its applications encompass a wide variety of specialized disciplines including medical imaging, machine vision, remote sensing and astronomy. Personal images captured by various digital cameras can easily be manipulated by a variety of dedicated image processing algorithms .Image restoration can be described as an important part of image processing technique. Image restoration has proved to be an active field of research in the present days. The basic objective is to enhance the quality of an image by removing defects and make it look pleasing. In this chapter, we propose an image restoration algorithm in MATLAB which is based on the neighbourhood property of a pixel. We focus on a certain iterative process to carry out restoration. One such method described in this regard is the Nearest Neighbourhood Method.