To enhance visual contrast and image quality for underwater image with conventional light source, an image enhancement algorithm based on iterative histogram equalization is proposed. Firstly, underwater image is decomposed into detail layer image and illumination layer image through Retinex model, and an image enhancement model is derived to improve the contrast effect of image on the basic of Weber contrast constant. Then, an image enhancement algorithm based on iterative histogram equalization is proposed to enhance the contrast of illumination layer image, and S-shade function is employed to stretch the contrast of detail layer image. Finally, the stretched detail layer image and enhanced illumination layer image are mixed to derive the preferable enhanced underwater image. Experimental results show that the visual contrast of underwater image is enhanced validly by the proposed algorithms, and the entropy and mean structural similarity index are higher than other image enhancement algorithms. Meanwhile the visual effect is ascended observably.